Exhibit 2.1
PRIVILEGED AND CONFIDENTIAL
AGREEMENT AND PLAN OF MERGER
BY AND AMONG UNION PROPERTY INVESTORS, INC.
KRANZCO REALTY TRUST AND KRT UNION CORP.
Dated November 12, 1996
TABLE OF CONTENTS
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ARTICLE I THE MERGER...................................................................................1
SECTION 1.01 The Merger. ..........................................................................1
SECTION 1.02 Effects of the Merger. ..............................................................2
SECTION 1.03 Merger Consideration. ...............................................................3
SECTION 1.04 Adjustment of Target Common Stock Consideration. .....................................5
SECTION 1.05 Certificate of Incorporation; Bylaws; Directors; Officers. ..........................6
ARTICLE II EXCHANGE OF SHARES...........................................................................6
SECTION 2.01 Surrender of Target Certificates......................................................6
SECTION 2.02 No Fractional Shares for Acquiror Series B Preferred Shares;
Cash Payments.........................................................................7
SECTION 2.03 No Dividends..........................................................................7
SECTION 2.04 Return to Acquiror....................................................................8
SECTION 2.05 No Further Transfer...................................................................8
SECTION 2.06 Withholding Rights....................................................................9
SECTION 2.07 Lost, Stolen or Destroyed Certificates................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF TARGET.....................................................9
SECTION 3.01 Organization and Good Standing........................................................9
SECTION 3.02 Capitalization of Target.............................................................10
SECTION 3.03 Authority of Target..................................................................11
SECTION 3.04 Consents and Approvals; No Violations................................................11
SECTION 3.05 Public Reports.......................................................................12
SECTION 3.06 Real Property; Contracts and Leases Relating to Real Property........................12
SECTION 3.07 Leases. ............................................................................15
SECTION 3.08 Tenant Improvements..................................................................16
SECTION 3.09 Environmental Matters................................................................17
SECTION 3.10 Insurance............................................................................18
SECTION 3.11 Absence of Certain Changes...........................................................18
SECTION 3.12 No Undisclosed Liabilities...........................................................18
SECTION 3.13 Litigation...........................................................................18
SECTION 3.14 Compliance with Applicable Law.......................................................19
SECTION 3.15 Taxes................................................................................19
SECTION 3.16 Financial Statements and Condition...................................................21
SECTION 3.17 Brokers or Finders...................................................................21
SECTION 3.18 Other Interests......................................................................21
SECTION 3.19 Disclosure...........................................................................21
SECTION 3.20 Vote Required........................................................................21
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Table of Contents
(Continued)
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SECTION 3.21 Parent Shares........................................................................21
SECTION 3.22 Target Preferred Stock...............................................................22
SECTION 3.23 Employee Benefit Plans...............................................................22
SECTION 3.24 Labor Matters........................................................................22
SECTION 3.25 Related Party Transactions...........................................................23
SECTION 3.26 Actions of Holders of Target Common Stock............................................23
SECTION 3.27 Books and Records....................................................................23
SECTION 3.28 Fairness Opinion.....................................................................23
SECTION 3.29 No Representation or Warranty........................................................24
SECTION 3.30 Obligations of Milestone.............................................................24
SECTION 3.31 Target Directors' and Officers' Liability Insurance Policy...........................24
SECTION 3.32 South Carolina Outparcel Agreement...................................................24
SECTION 3.33 Pending Milestone Action.............................................................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND
NEWCO.......................................................................................25
SECTION 4.01 Organization and Good Standing.......................................................25
SECTION 4.02 Capitalization of Acquiror and Newco.................................................26
SECTION 4.03 Authority of Acquiror and Newco......................................................27
SECTION 4.04 Consents and Approvals; No Violations................................................27
SECTION 4.05 Public Reports.......................................................................28
SECTION 4.06 Real Property; Contracts and Leases Relating to Real Property........................28
SECTION 4.07 Leases. ............................................................................31
SECTION 4.08 Environmental Matters................................................................31
SECTION 4.09 Insurance............................................................................32
SECTION 4.10 Absence of Certain Changes...........................................................32
SECTION 4.11 No Undisclosed Liabilities...........................................................32
SECTION 4.12 Litigation...........................................................................33
SECTION 4.13 Compliance with Applicable Law.......................................................33
SECTION 4.14 Taxes................................................................................34
SECTION 4.15 Financial Statements and Condition...................................................34
SECTION 4.16 Newco................................................................................35
SECTION 4.17 Brokers or Finders...................................................................35
SECTION 4.18 Other Interests......................................................................35
SECTION 4.19 Disclosure...........................................................................35
SECTION 4.20 Employee Benefit Plans...............................................................35
SECTION 4.21 Labor Matters........................................................................36
SECTION 4.22 Related Party Transactions...........................................................36
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Table of Contents
(Continued)
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SECTION 4.23 Books and Records....................................................................37
SECTION 4.24 No Representation or Warranty........................................................37
ARTICLE V COVENANTS...................................................................................37
SECTION 5.01 Target PreClosing Obligations........................................................37
SECTION 5.02 Acquiror Pre-Closing Obligations.....................................................41
SECTION 5.03 HartScottRodino and Other Filings....................................................43
SECTION 5.04 Title Insurance......................................................................43
SECTION 5.05 No Solicitations.....................................................................43
SECTION 5.06 Access to Information................................................................44
SECTION 5.07 Target Stockholder Meeting...........................................................45
SECTION 5.08 Target Proxy Statement...............................................................45
SECTION 5.09 Registration Statement...............................................................46
SECTION 5.10 Efforts to Consummate................................................................48
SECTION 5.11 Letters of Accountants...............................................................48
SECTION 5.12 Indemnification of Managers..........................................................49
SECTION 5.13 No Breach of Representations and Warranties..........................................49
SECTION 5.14 Consents; Notices....................................................................50
SECTION 5.15 Public Announcements.................................................................50
SECTION 5.16 Exchange Listing.....................................................................51
SECTION 5.17 Filing of Articles Supplementary.....................................................51
SECTION 5.18 Closing Certificates.................................................................51
SECTION 5.19 Reorganization.......................................................................51
SECTION 5.20 No Improvements; Damage or Destruction; Condemnation;
Environmental........................................................................52
SECTION 5.21 Affiliates of Target.................................................................52
SECTION 5.22 Estoppel Certificates................................................................53
SECTION 5.23 Indemnification Obligations..........................................................53
SECTION 5.24 First Union Line of Credit...........................................................53
SECTION 5.25 Sale of South Carolina Outparcel.....................................................54
SECTION 5.26 Termination of Management Agreements.................................................54
ARTICLE VI CONDITIONS TO ACQUIROR'S AND NEWCO'S OBLIGATIONS............................................55
SECTION 6.01 Representations and Warranties.......................................................55
SECTION 6.02 Covenants............................................................................55
SECTION 6.03 Officer's Certificate................................................................55
SECTION 6.04 Opinion of Counsel...................................................................55
SECTION 6.05 Absence of Changes...................................................................55
SECTION 6.06 Number of Dissenting Shares..........................................................56
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Table of Contents
(Continued)
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SECTION 6.07 Approvals and Consents...............................................................56
SECTION 6.08 Injunctions..........................................................................56
SECTION 6.09 HSR Act..............................................................................56
SECTION 6.10 Effectiveness of Registration Statement..............................................56
SECTION 6.11 Stockholder Approval.................................................................56
SECTION 6.12 Accountants' Letters.................................................................57
SECTION 6.13 Shareholders and Voting Trust Agreement..............................................57
SECTION 6.14 Guaranty Agreement...................................................................57
SECTION 6.15 Registration Rights Agreement........................................................57
SECTION 6.16 Termination of Target Affiliate Contracts............................................58
SECTION 6.17 Redemption of Target Preferred Stock.................................................58
SECTION 6.18 Estoppel Certificates................................................................58
SECTION 6.19 Statement of Accounts Receivable.....................................................58
SECTION 6.20 Title Insurance Policies.............................................................59
ARTICLE VII CONDITIONS TO TARGET'S OBLIGATIONS..........................................................59
SECTION 7.01 Representations and Warranties.......................................................59
SECTION 7.02 Covenants............................................................................59
SECTION 7.03 Officer's Certificate................................................................59
SECTION 7.04 Opinion of Counsel...................................................................59
SECTION 7.05 Absence of Changes...................................................................60
SECTION 7.06 Approvals and Consents...............................................................60
SECTION 7.07 Injunctions..........................................................................60
SECTION 7.08 HSR Act..............................................................................60
SECTION 7.09 Effectiveness of Registration Statement..............................................60
SECTION 7.10 Stockholder Approval.................................................................60
SECTION 7.11 Merger...............................................................................60
SECTION 7.12 Accountants' Letters.................................................................60
SECTION 7.13 Financial Statements.................................................................61
SECTION 7.14 Registration Rights Agreement........................................................61
SECTION 7.15 Shareholders Agreement...............................................................61
SECTION 7.16 Fairness as to Target Preferred Stock................................................61
ARTICLE VIII TERMINATION AND AMENDMENT...................................................................62
SECTION 8.01 Termination..........................................................................62
SECTION 8.02 Effect of Termination. ...................................................63
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Table of Contents
(Continued)
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ARTICLE IX MISCELLANEOUS...............................................................................66
SECTION 9.01 Survival of Agreements and Representations and Warranties............................66
SECTION 9.02 Incorporation of Exhibits............................................................66
SECTION 9.03 Notices..............................................................................66
SECTION 9.04 Descriptive Headings.................................................................67
SECTION 9.05 Assignment; Binding Effect; Benefit..................................................67
SECTION 9.06 Counterparts.........................................................................68
SECTION 9.07 Entire Agreement.....................................................................68
SECTION 9.08 Governing Law and Consent to Jurisdiction............................................68
SECTION 9.09 Fees and Expenses....................................................................68
SECTION 9.10 Non-Recourse.........................................................................68
SECTION 9.11 Enforcement..........................................................................69
SECTION 9.12 Severability.........................................................................69
SECTION 9.13 Amendment............................................................................69
SECTION 9.14 Extension; Waiver....................................................................70
SECTION 9.15 Knowledge............................................................................70
SECTION 9.16 Interpretation.......................................................................70
SCHEDULES AND EXHIBITS
Schedule 1.04(a) Definitions of Total Current Assets and Total Current Liabilities
Schedule 6.18 Tenants Required to Furnish Estoppel Certificates
Exhibit A Form of Articles Supplementary for Acquiror's 9.75% Series B
Cumulative Convertible Preferred Stock
Exhibit B Form of Articles Supplementary for Acquiror's Series C Cumulative
Redeemable Preferred Shares
Exhibit C Form of Affiliate Letter
Exhibit D Form of Estoppel Certificate
Exhibit E Form of Shareholder and Voting Trust Agreement
Exhibit F Form of Guaranty Agreement
Exhibit G Form of Registration Rights Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated November 12, 1996, by and among
Union Property Investors, Inc., a Delaware corporation ("Target"), Kranzco
Realty Trust, a Maryland real estate investment trust ("Acquiror;" Acquiror and
its directly or indirectly majority-owned subsidiary corporations and
partnerships, taken together on a consolidated basis, are collectively referred
to herein as the "Company;" and such subsidiary corporations and partnerships
are individually referred to herein as "Acquiror Subsidiaries"), and KRT Union
Corp. ("Newco"), a Delaware wholly-owned subsidiary of Acquiror organized solely
for the purpose of consummating the merger and the other transactions hereby
contemplated.
WHEREAS, the Board of Directors of each of Target and Acquiror have
determined that it is in the best interests of their respective entities and
stockholders to consummate the business combination transaction provided for
herein, pursuant to which Target will, on the terms and subject to the
conditions set forth herein, merge with and into Newco so that Newco will be the
surviving entity and a qualified real estate investment trust ("REIT")
subsidiary within the meaning of Section 856(i)(2) of the Internal Revenue Code
of 1986, as amended (the "Code");
WHEREAS, for federal income tax purposes, the merger is intended to be
treated as a reorganization pursuant to the provisions of Section 368(a)(1)(A)
of the Code, and for accounting purposes shall be accounted for as a "purchase";
and
WHEREAS, the parties hereto desire to make certain covenants,
representations, warranties and agreements in connection with the merger and
also to prescribe certain conditions to the merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger.
(a) Upon the terms and subject to the conditions hereof and in
accordance with Section 251 of the Delaware General Corporation Law (the
"DGCL"), on the first business day following the satisfaction or waiver of the
conditions set forth in Article VI and Article VII, unless the parties shall
otherwise agree, a closing (the "Closing") of the merger of Target
with and into Newco in accordance with this Agreement with the separate
corporate existence of Target thereupon ceasing (the "Merger") shall take place
at the offices of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP, 0000 Xxxxxx
xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 9:00 a.m. (local time) or such
other place or time as the parties shall agree in writing. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date".
(b) Concurrently with the Closing, a certificate of merger (the
"Delaware Merger Certificate"), in form and substance reasonably satisfactory to
Acquiror and Target, providing for the merger of Target with and into Newco
shall be duly prepared, executed and filed by Newco, as the surviving
corporation (the "Surviving Corporation"), with the Delaware Secretary of State
in accordance with the relevant provisions of the DGCL and the Merger shall
become effective upon the effective date of the filing of the Delaware Merger
Certificate, or at such later time as the parties shall have agreed upon and
designated in the Delaware Merger Certificate in accordance with the DGCL. The
date and time the Merger becomes effective is referred to herein as the
"Effective Time".
SECTION 1.02 Effects of the Merger.
(a) The Merger shall have the effects set forth in the DGCL and as
hereinafter set forth. Immediately following the Merger, the Surviving
Corporation shall (i) continue its corporate existence under the laws of the
State of Delaware, (ii) be a wholly-owned, qualified REIT subsidiary of
Acquiror, and (iii) succeed to all rights, assets, liabilities and obligations
of Target and Newco in accordance with the DGCL. At the Effective Time, in
accordance with the relevant provision of the DGCL, the separate existence of
Target shall cease and the Surviving Corporation shall succeed, without other
transfer, to all the rights and property of each of Newco and Target and shall
be subject to all the debts and liabilities of each in the manner provided by
the DGCL.
(b) At the Effective Time each share of common stock, par value $.01
per share, of Newco issued and outstanding immediately prior to the Effective
Time shall remain outstanding and by reason of the Merger and without any action
by the holder thereof represent one validly issued, fully paid and
non-assessable share of common stock, par value $.01 per share, of the Surviving
Corporation. As a result of the Merger and without any action by the holder
thereof, (i) all shares of Target's common stock, par value $.01 per share (the
"Target Common Stock"), shall cease to be outstanding and shall be cancelled and
retired and shall cease to exist, and, except as provided in Section 1.03(d),
each holder of a Target Certificate (as defined in Section 2.01) representing
any shares of Target Common Stock (a "Target Common Stockholder") shall
thereafter cease to have any rights with respect to such shares of Target Common
Stock, except the right to receive, without interest, the Target Common Stock
Consideration (as defined in Section 1.03 below) and cash in lieu of fractional
share interests upon the surrender of such Target Certificate in accordance with
this Agreement and (ii) all shares of Target's preferred stock, par value $.01
per share (the "Target Preferred Stock"), shall cease to be outstanding and
shall be cancelled and retired and
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shall cease to exist, and each holder of a Target Certificate (as defined in
Section 2.01) representing any shares of Target Preferred Stock shall thereafter
cease to have any rights with respect to such shares of Target Preferred Stock
except the right to receive Acquiror Series C Preferred Shares in accordance
with Section 1.03.
(c) Each share of Target Common Stock issued and held in Target's
treasury at the Effective Time, if any, shall, by virtue of the Merger, cease to
be outstanding and shall be cancelled and retired and shall cease to exist
without payment of any consideration therefor.
SECTION 1.03 Merger Consideration.
(a) At the Effective Time, each share of Target Common Stock issued and
outstanding immediately prior to the Effective Time shall, by reason of the
Merger and without any action by the holder thereof, be converted into the right
to receive, subject to adjustment pursuant to Section 1.04 and in addition to
the cash to be received, if any, in lieu of the issuance of fractional shares of
Acquiror Series B Preferred Shares pursuant to Section 2.02), (i) 0.2980 shares
of Acquiror's 9.75% Series B Cumulative Convertible Preferred Shares, par value
$.01 per share each with a $25.00 per share liquidation preference (the
"Acquiror Series B Preferred Shares"), the form of Articles Supplementary for
which is attached as Exhibit A hereto, plus (ii) the number of shares of
Acquiror Series B Preferred Shares equal to (A) an amount equal to the result of
dividing the sum of (1) the aggregate of the payments made by Target for the
reduction of the principal amount of the Underlying Debt (as hereafter defined
and listed in the Disclosure Letter delivered by Target to Acquiror
simultaneously with the execution and delivery of this Agreement (the "Target
Disclosure Letter")), and (2) the amount paid for the redemption of the Target
Preferred Stock, in each case from September 30, 1996 through the date one day
prior to the Closing Date (the aggregate of such payments is referred to
hereinafter as "Closing Adjustment Payments"), by $25, divided by (B) 3,789,171,
plus (iii) if the unpaid Merger Expenses (as defined below) are equal to or less
than $2,000,000, the number of shares of Acquiror Series B Preferred Shares
equal to (A) an amount equal to the result of dividing the excess of $2,000,000
over the aggregate of all unpaid Merger Expenses substantiated to Acquiror's
reasonable satisfaction, by $25, divided by (B) 3,789,171 minus (iv) if the
unpaid Merger Expenses are greater than $2,000,000, the number of shares of
Acquiror Series B Preferred Shares equal to (A) an amount equal to the result of
dividing the excess of the unpaid Merger Expenses over $2,000,000 by $25,
divided by (B) 3,789,171. The right to receive Acquiror Series B Preferred
Shares pursuant to this Section 1.03(a) (as adjusted pursuant to Section 1.04),
and the cash to be received, if any, in lieu of the issuance of fractional
shares of Acquiror Series B Preferred Shares pursuant to Section 2.02, is
hereinafter referred to as the "Target Common Stock Consideration". "Merger
Expenses" shall mean (i) all investment banking fees and disbursements
(including, without limitation, finders fees), legal fees and disbursements, and
accounting fees and disbursements, in each case incurred by Target in connection
with the negotiation, execution and delivery of this Agreement and the
consummation of the Merger and other transactions contemplated by this Agreement
and the Ancillary Documents (as defined below), plus (ii) the lesser of (A)
$200,000 and (B) one-half of the following: all debt
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assumption and prepayment fees, printing expenses, filing fees, property and
other taxes payable in jurisdictions in which Target is, or is required to be,
qualified to do business, property transfer taxes, any other fees and expenses
paid to obtain any required consents and approvals, and any fees and expenses
required to obtain the Target D & O Liability Insurance Tail (as defined below),
in each case incurred in connection with the negotiation, execution and delivery
of this Agreement and the consummation of the Merger and other transactions
contemplated by this Agreement and the Ancillary Documents.
(b) At the Effective Time, each share of the Target Preferred Stock
(together with the Target Common Stock, the "Target Stock"), issued and
outstanding immediately prior to the Effective Time shall, by reason of the
Merger and without any action by the holder thereof, be converted into the right
to receive one share of Acquiror Series C Cumulative Redeemable Preferred
Shares, par value $.01 per share each with a $10.00 per share redemption value
and liquidation preference (the "Acquiror Series C Preferred Shares"), the form
of Articles Supplementary for which is attached as Exhibit B hereto.
(c) Notwithstanding Subsection 1.03(a), shares of Target Common Stock
issued and outstanding immediately prior to the Effective Time and held by a
holder of Target Common Stock ("Dissenting Shares") who has not voted in favor
of the Merger or consented thereto in writing and who has demanded appraisal for
such stock in accordance with the DGCL and is entitled thereto, shall not be
converted into the right to receive shares of Acquiror Series B Preferred Shares
unless such holder fails to perfect or withdraws or loses his right to
appraisal. If, after the Effective Time, such holder fails to perfect or
withdraws or loses the right to appraisal to which he is entitled, such shares
of Target Common Stock shall thereupon be deemed to have been converted into and
to represent the right to receive, at the Effective Time, the shares of Acquiror
Series B Preferred Shares pursuant to the terms of this Section 1.03, without
any interest thereon or addition thereto. Target shall give Acquiror prompt
notice of any written demands for appraisal or withdrawals of demands for
appraisal received by Target and, except with the prior written consent of
Acquiror, shall not make any payment with respect to, or settle or offer to
settle any such demands, and, prior to the Effective Time, Acquiror shall have
the right to participate in all negotiations and proceedings with respect to
such demands.
(d) Except as provided in this Section 1.03, (i) holders of Target
Common Stock shall, at and after the Effective Time, by reason of the Merger and
without any action by the holder thereof, cease to have any rights with respect
to such Target Common Stock, except the right to receive the Target Common Stock
Consideration, and (ii) holders of Target Preferred Stock shall, at and after
the Effective Time, by reason of the Merger and without any action by the holder
thereof, cease to have any rights with respect to such Target Preferred Stock,
except the right to receive Acquiror Series C Preferred Shares, in each case in
accordance with this Section 1.03.
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SECTION 1.04 Adjustment of Target Common Stock Consideration.
(a) The parties agree that the number of shares of Acquiror Series B
Preferred Shares to be exchanged for each share of Target Common Stock (i) shall
be increased, as set forth in Section 1.04(b), to the extent that the amount
(the "Adjustment Increase Amount") by which the Total Current Assets (as defined
on Schedule 1.04(a) attached hereto) as of the close of business on the day
immediately preceding the Closing Date (the "Adjustment Time") exceeds the Total
Current Liabilities (as defined on Schedule 1.04(a) attached hereto) as of the
Adjustment Time or (ii) shall be reduced, as set forth in Section 1.04(b), by an
amount (the "Adjustment Decrease Amount") equal to the amount by which the Total
Current Liabilities (excluding unpaid Merger Expenses) as of the Adjustment Time
exceed Total Current Assets as of the Adjustment Time. For purposes of this
Section 1.04, (i) Total Current Assets shall not include the South Carolina
Outparcel Proceeds (as defined in Section 5.25) and (ii) Total Current
Liabilities shall not include (A) any unpaid Merger Expenses, (B) any unpaid
costs and expenses provided for in clauses (2) and (3) of Section 5.25 relating
to the South Carolina Outparcel Transfer or (C) up to $19,000 for income taxes
accrued by Target in accordance with GAAP but not paid on the Closing Date
arising from the South Carolina Outparcel Transfer. Except as otherwise provided
in this Agreement, Target shall not take any action after the date hereof, and
has not taken any action, that could reasonably be expected to change the Total
Current Assets or the Total Current Liabilities during the period from the
Adjustment Time to the Effective Time.
(b) The number of shares of Acquiror Series B Preferred Shares to be
exchanged for each share of Target Common Stock shall be increased by the number
of shares of Acquiror Series B Preferred Shares equal to (A) an amount equal to
the result of dividing the Adjustment Increase Amount, by $25, divided by (B)
3,789,171. The number of shares of Acquiror Series B Preferred Shares to be
exchanged for each share of Target Common Stock shall be decreased by the number
of shares of Acquiror Series B Preferred Shares equal to (A) an amount equal to
the result of dividing the Adjustment Decrease Amount, by $25, divided by (B)
3,789,171.
(c) In order to determine whether any adjustments are required pursuant
to this Section 1.04, the parties agree that Target will (i) calculate the
Adjustment Increase Amount or Adjustment Decrease Amount, as the case may be,
and (ii) deliver to Acquiror on or before the Closing Date an unaudited
financial statement (the "Closing Adjustment Statement") and supporting and
other substantiating documentation, setting forth in reasonable detail the Total
Current Assets and Total Current Liabilities of Target as of the Adjustment
Time, together with a letter from Deloitte & Touche, Target's independent public
accountants, describing the procedures performed by them concerning the accuracy
of the amounts and calculations set forth in, and otherwise containing such
statements and information with respect to the Closing Adjustment Statement, in
form and substance reasonably satisfactory to Acquiror. In making its
calculations, Target shall apply the same accounting methods used by Target in
the preparation of Target's unaudited balance sheet as at September 30, 1996.
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SECTION 1.05 Certificate of Incorporation; By-laws; Directors;
Officers.
(a) The Certificate of Incorporation and By-laws of Newco in effect on
the date hereof shall be the Certificate of Incorporation and By-laws of the
Surviving Corporation at the Effective Time, and thereafter may be amended in
accordance with their respective terms and applicable law.
(b) The directors of Newco immediately prior to the Effective Time
shall be the directors of the Surviving Corporation as of and following the
Effective Time.
(c) The officers of Newco immediately prior to the Effective Time shall
be the officers of the Surviving Corporation as of and following the Effective
Time.
ARTICLE II
EXCHANGE OF SHARES
SECTION 2.01 Surrender of Target Certificates. Prior to the Effective
Time, Acquiror shall make available to an exchange agent selected by Acquiror,
which shall be Acquiror's transfer agent, or such other party reasonably
acceptable to Target (the "Exchange Agent"), in trust for the benefit of the
holders of Target Common Stock and Target Preferred Stock, for exchange in
accordance with this Article II, the amount of cash payable in lieu of
fractional shares pursuant to Section 2.02 and the certificates representing the
aggregate number of shares of Acquiror Series B Preferred Shares and Acquiror
Series C Preferred Shares, respectively, to be issued pursuant to Section 1.03.
Promptly after the Effective Time, the Exchange Agent shall mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time represented shares of Target Common Stock or Target Preferred
Stock (collectively, the "Target Certificates" and individually, a "Target
Certificate") a letter of transmittal and instructions for use in effecting the
surrender of Target Certificates in exchange for cash in lieu of fractional
shares, after giving effect to any required withholding tax, and certificates
representing shares of Acquiror Series B Preferred Shares or Acquiror Series C
Preferred Shares, respectively, and cash in lieu of fractional shares, if
applicable, after giving effect to any required withholding tax. The letter of
transmittal shall specify that delivery shall be effected, and risk of loss and
title to Target Certificates shall pass, only upon delivery of the Target
Certificates to the Exchange Agent, and shall be in such form and have such
other provisions as Acquiror shall reasonably specify. Upon surrender of a
Target Certificate representing shares of Target Common Stock to the Exchange
Agent, together with such letter of transmittal, duly executed, the holder of
such
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Target Certificate shall be entitled to receive in exchange therefor shares of
Acquiror Series B Preferred Shares and cash in lieu of fractional shares,
pursuant to Section 1.03 and subject to Section 2.06, for each share of Target
Common Stock formerly represented by such Target Certificate, and the Target
Certificate so surrendered shall forthwith be canceled. Upon surrender of a
Target Certificate representing shares of Target Preferred Stock to the Exchange
Agent, together with such letter of transmittal, duly executed, the holder of
such Target Certificate shall be entitled to receive in exchange therefor shares
of Acquiror Series C Preferred Shares pursuant to the terms of Section 1.03 and
the Target Certificate so surrendered shall be cancelled. Until surrendered as
contemplated by this Article II, from and after the Effective Time, each Target
Certificate shall be deemed to represent only the right to receive the above
described consideration for each share of Target Common Stock or Target
Preferred Stock formerly represented by such Target Certificate, and shall not
evidence any interest in Acquiror or Newco. If a certificate representing shares
of Acquiror Series B Preferred Shares or Acquiror Series C Preferred Shares is
to be issued to and cash is to be paid in lieu of fractional shares to a person
other than the one in whose name the Target Certificate surrendered in exchange
therefor is registered, it shall be a condition to such issuance or payment that
such Target Certificate be properly endorsed (or accompanied by an appropriate
instrument of transfer), with signatures guaranteed, if requested, and
accompanied by evidence that any applicable stock transfer taxes have been paid
or provided for.
SECTION 2.02 No Fractional Shares for Acquiror Series B Preferred
Shares; Cash Payments.
(a) No certificate or scrip representing fractional shares of Acquiror
Series B Preferred Shares shall be issued upon the surrender for exchange of
Target Certificates representing shares of Target Common Stock, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of Acquiror. The fractional shares of Acquiror Series B
Preferred Shares to be received by each Target Common Stockholder will be
aggregated so that no Target Common Stockholder will receive cash in an amount
equal to or greater than the value of one full share of Acquiror Series B
Preferred Shares. In lieu of any such fractional share, the Exchange Agent shall
pay, subject to Section 2.06, to each Target Common Stockholder who otherwise
would be entitled to receive a fractional share of Acquiror Series B Preferred
Shares an amount of cash determined by multiplying $25 by the fraction of a
share of Acquiror Series B Preferred Shares to which such holder would otherwise
be entitled. The transfer of cash to Target Common Stockholders in lieu of
fractional shares of Acquiror Series B Preferred Shares, if any, is solely for
the purpose of avoiding the expense and inconvenience to Acquiror of accounting
for fractional shares and does not represent separately bargained-for
consideration.
(b) Acquiror shall make available to the Exchange Agent sufficient
funds as and when necessary to enable the Exchange Agent to make the cash
payments to be made in lieu of the issuance of fractional shares under Section
2.02. In no event shall interest be paid or accrued on any such cash payments.
The cash amount to be paid to the holders of Target Common Stock pursuant to
Section 2.02 shall be rounded up to the nearest cent.
SECTION 2.03 No Dividends. No dividends or other distributions declared
or made after the Effective Time with respect to Acquiror Series B Preferred
Shares or Acquiror Series C Preferred Shares with a record date after the
Effective Time shall be paid to the holder of any Target Certificate with
respect to the Acquiror Series B Preferred Shares or the Acquiror Series C
Preferred Shares represented thereby until the holder of record of such Target
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Certificate shall surrender such Target Certificate for exchange as provided
herein. Dividends or other distributions with a record date after the Effective
Time payable in respect of Acquiror Series B Preferred Shares or Acquiror Series
C Preferred Shares held by the Exchange Agent shall be paid to the Exchange
Agent and held in trust for the benefit of such holders of Target Certificates.
Following surrender of any previously unsurrendered Target Certificate
surrendered for exchange as provided herein, there shall be paid to the record
holder of the certificates representing shares of Acquiror Series B Preferred
Shares or Acquiror Series C Preferred Shares issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any dividends
or other distributions with a record date after the Effective Time theretofore
paid with respect to such shares of Acquiror Series B Preferred Shares or
Acquiror Series C Preferred Shares, respectively, and (ii) at the date of
payment of any dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender, the amount of such dividends or other distributions payable with
respect to such shares of Acquiror Series B Preferred Shares or Acquiror Series
C Preferred Shares, respectively.
SECTION 2.04 Return to Acquiror. Any shares of Acquiror Series B
Preferred Shares or Series C Preferred Shares and any cash in lieu of fractional
share interests made available to the Exchange Agent and not exchanged for
Target Certificates within 12 months after the Effective Time and any dividends
and distributions held by the Exchange Agent for payment or delivery to the
holders of unsurrendered Target Certificates representing Target Common Stock or
Target Preferred Stock and unclaimed at the end of such 12 month period shall be
redelivered or repaid by the Exchange Agent to Acquiror, after which time any
holder of Target Certificates who has not theretofore delivered or surrendered
such Target Certificates to the Exchange Agent, subject to applicable law, shall
look only to Acquiror for the consideration to be paid pursuant to the terms of
Section 1.03 and, if applicable, the dividends or distributions to be paid
pursuant to Section 2.03. Notwithstanding the foregoing, none of the Exchange
Agent, the Surviving Corporation or any other party hereto shall be liable to a
holder of Target Common Stock or Target Preferred Stock for any shares of
Acquiror Series B Preferred Shares or Acquiror Series C Preferred Shares,
respectively, cash in lieu of fractional share interests, if applicable, or
dividends or distributions delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
SECTION 2.05 No Further Transfer. Following the Effective Time, there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Target Common Stock or Target Preferred
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Target Certificates issued prior to the Effective Time are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged for shares of Acquiror Series B Preferred Shares or Acquiror
Series C Preferred Shares as provided in this Article II. Target Certificates
surrendered for exchange by any person (an "Affiliate") constituting an
"affiliate" of Target for purposes of Rule 145(c) under the Securities Act of
1933, as amended (the "1933 Act"), shall not be exchanged until Acquiror has
received a written agreement from such person as provided in Section 5.21.
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SECTION 2.06 Withholding Rights. The Exchange Agent and the Surviving
Corporation shall be entitled to deduct and withhold from the payment of any
Target Common Stock Consideration, cash in lieu of fractional share interests,
and any other consideration payable to any holder of the Target Stock (a "Target
Stockholder") pursuant to this Agreement, such amounts as the Exchange Agent or
the Surviving Corporation may be required to deduct and withhold under the Code,
or any provision of any state, local or foreign law. To the extent that any
amounts are so withheld, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to such Target Stockholder.
SECTION 2.07 Lost, Stolen or Destroyed Certificates. In the event that
any Target Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Target
Certificate to be lost, stolen or destroyed and, if required by the Surviving
Corporation in its sole discretion, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Target Certificate,
the Exchange Agent or the Surviving Corporation shall exchange for such lost,
stolen or destroyed Target Certificate such Acquiror Series B Preferred Shares,
Acquiror Series C Preferred Shares, cash, dividends and distributions to which
such person would otherwise have been entitled had such Target Certificate been
surrendered in accordance with Section 2.01.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Target represents and warrants to Acquiror and Newco as follows:
SECTION 3.01 Organization and Good Standing. Target is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
operate, lease and Encumber its properties and assets and to carry on its
business as it is now being conducted. Target is duly qualified or licensed to
do business as a foreign corporation, and is in good standing, under the laws of
(a) each jurisdiction listed in the Target Disclosure Letter and (b) each other
jurisdiction in which the character of the properties owned, operated, leased or
Encumbered by Target therein or in which the carrying on of its business makes
such qualification or licensing necessary, except where the failure to be so
qualified, licensed or in good standing could not reasonably be expected to have
a Target Material Adverse Effect. "Target Material Adverse Effect" means, with
respect to Target, any event or events that could, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
business, assets, results of operations or financial condition of Target or the
Target Properties (as defined in Section 3.06), taken as a whole. For the
purposes of this Agreement, a Target Material Adverse Effect shall be deemed to
have occurred to the extent that any one or more events, individually or in the
aggregate, could reasonably be expected to (i) adversely affect Target's gross
revenues by $500,000 or more during any 12-month period, or (ii) have a cost to
remedy, or result in an expense or liability to Target, the Company or Newco, or
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acceleration of the payment of any obligation of Target (collectively, a "Target
Remediation Cost"), of $500,000 or more, or (iii) adversely affect the value of
the Target Properties by $2,500,000 or more. The amounts (i) of any effect on
Target's gross revenues and (ii) any Target Remediation Costs in case of each of
clauses (i), (ii) and (iii) that could reasonably be expected to result from
such one or more events, are hereinafter referred to as the "Target Costs."
Notwithstanding the foregoing, a Target Material Adverse Effect shall not be
deemed to have occurred if (A) any one or more of the events giving rise to a
Target Cost or loss of value is covered by insurance and Target has a right to
receive payments pursuant to such insurance policy as a result of such event or
events, (B) the aggregate amount of Target Costs and/or loss of value does not
exceed $2,500,000 or $5,000,000, respectively, and (C) after giving effect to
the application of such insurance proceeds, the aggregate amount of Target Costs
and/or the loss of value is less than $500,000 or $2,500,000, respectively.
Target has delivered to Acquiror true, correct and complete copies of its
Certificate of Incorporation and By-laws, each as amended to date. Any effects
on Target's gross revenues or the value of the Target Properties that is
attributable to any default, diminution of rent or rejection under any Target
Lease by any tenant that is the subject of any bankruptcy proceedings on the
date hereof shall not be included in any determination of whether a Target
Material Adverse Effect has occurred or in any calculation of Target Costs.
SECTION 3.02 Capitalization of Target. The authorized capital stock of
Target consists of (i) 20,000,000 shares of Target Common Stock, of which
3,789,171 shares are issued and outstanding as of the date hereof, and (ii)
650,000 shares of Target Preferred Stock, of which 395,834 shares are issued and
outstanding as of the date hereof. All of the issued and outstanding shares of
Target Common Stock and Target Preferred Stock have been duly authorized and are
validly issued, fully paid and nonassessable and are free of preemptive rights
with no personal liability attaching to the ownership thereof. Target has no
outstanding bonds, debentures, notes, or other obligations the holders of which
have the right to vote (or are convertible into or exercisable for securities
having the right to vote) with the holders of Target Common Stock on any matter.
Except as set forth in the Target Disclosure Letter, Target does not have and is
not bound by, and at the Effective Time, will not have or be bound by, any
outstanding subscriptions, options, warrants, calls, convertible securities,
rights, or other contracts, commitments, agreements, arrangements or
understandings (collectively, "Contracts") of any character, to or by which
Target is a party or is bound, which, directly or indirectly, obligate Target to
issue, deliver, transfer or sell any shares of Target Common Stock or Target
Preferred Stock or any other equity or debt security of Target or any securities
representing the right to purchase or otherwise receive any shares of Target
Common Stock or Target Preferred Stock or any other equity or debt security of
Target. After the Effective Time, the Surviving Corporation will have no
obligation to issue, deliver, transfer or sell any shares of capital stock or
other equity interest of Target or the Surviving Corporation pursuant to any
employee benefit plan of Target.
SECTION 3.03 Authority of Target. Target has all requisite corporate
power and authority to execute and deliver this Agreement and the documents (the
"Ancillary Documents") needed to consummate the Merger and the other
transactions contemplated by
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this Agreement to which Target is a party, and, subject to approval by the
Target Stockholders in accordance with the DGCL, to consummate the Merger and
the other transactions contemplated by this Agreement and the Ancillary
Documents, and to take all other actions required to be taken by it pursuant to
the provisions hereof and the Ancillary Documents. The execution, delivery and
performance by Target of this Agreement and the Ancillary Documents to which
Target is a party, the consummation by Target of the Merger and the other
transactions contemplated by this Agreement and the Ancillary Documents, have
been duly and validly authorized and approved by all requisite corporate action
of Target and no other corporate proceedings on the part of Target are necessary
to authorize the execution, delivery and performance of this Agreement or any of
the Ancillary Documents, to consummate the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents, other than the
approval of the Merger and adoption of this Agreement and the Ancillary
Documents by the Target Stockholders in accordance with the DGCL. This Agreement
and each of the Ancillary Documents to which Target is a party have been duly
and validly executed and delivered by Target and constitute valid and binding
agreements of Target, enforceable against Target in accordance with their
respective terms, except as may be limited by bankruptcy and other laws
affecting the enforceability of creditors' rights generally or laws governing
the availability of specific performance or other equitable remedies, or
restrictions of the enforcement of securities indemnification and contribution
provisions imposed by public policy.
SECTION 3.04 Consents and Approvals; No Violations. Except as set forth
in the Target Disclosure Letter and for applicable requirements of the 1933 Act,
Securities Exchange Act of 1934, as amended (the "1934 Act"), state Blue Sky
laws, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), if any, the filing and recordation of the Delaware Merger
Certificate, as required by the DGCL, and such filings, authorizations, orders
and approvals as may be required under State "control share acquisition",
"antitrust" or other similar statutes or regulations, or such filings,
authorizations, orders and approvals as may be required under the By-laws of the
National Association of Securities Dealers, Inc. ("NASD") (collectively, the
"Target Required Filings"), no filing or registration with, and no consent,
authorization, declaration or approval of, any governmental body, court,
arbitration board, tribunal or authority ("Governmental Entity"), or any third
party, is necessary for the execution, delivery and performance by Target of
this Agreement or any of the Ancillary Documents or the consummation of the
Merger and the other transactions contemplated by this Agreement and the
Ancillary Documents. The Target Disclosure Letter sets forth a true, correct and
complete list of all filings, registrations, consents, authorizations,
declarations or approvals necessary to consummate the Merger and the other
transactions contemplated by this Agreement and the Ancillary Documents (the
"Target Consents"). Except as set forth in the Target Disclosure Letter, subject
to approval by the Target Stockholders in accordance with the DGCL, neither the
execution, delivery and performance by Target of this Agreement or any of the
Ancillary Documents nor the consummation by Target of the Merger and the other
transactions contemplated by this Agreement and the Ancillary Documents will (i)
constitute any violation or breach of any provision of the Certificate of
Incorporation or By-laws of Target, or (ii) constitute any
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violation or breach of any provision of, or constitute a default (or an event
which, with the giving of notice or the passage of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, pledges, mortgages, deeds of trust, security
interests, claims against title, charges, options or other encumbrances
("Encumbrances") upon any of the properties of Target under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any Target Contract (as defined below), or any
franchise, permit, concession, Contract, or other instrument, or other
obligation to which Target is a party, or by which Target or any of its
properties is bound or affected except, with respect to this clause (ii), for
those which could not have a Target Material Adverse Effect.
SECTION 3.05 Public Reports. Target has delivered to Acquiror true,
correct and complete copies of (i) its Annual Report on Form 10-KSB for the year
ended December 31, 1995, (ii) its Quarterly Report on Form 10-QSB for the three
months ended Xxxxx 00, 0000, (xxx) its Quarterly Report on Form 10-QSB for the
six months ended June 30, 1996, and (iv) all other registration statements,
reports, proxy statements, information statements and other documents filed by
Target with the Securities and Exchange Commission since December 31, 1995 (the
"SEC"); in each case including all exhibits, amendments and supplements thereto
and each of such documents is in the form (including exhibits, amendments and
supplements thereto) filed with the SEC (collectively, the "Target SEC
Reports"). Each of the Target SEC Reports was filed with the SEC in a timely
manner. The Target SEC Reports constitute all registration statements, reports,
proxy statements, information statements and other documents required to be
filed by Target since December 31, 1995 under the 1933 Act, the 1934 Act and the
rules and regulations promulgated thereunder (the "Securities Laws"). As of
their respective dates, the Target SEC Reports (i) complied in all material
respects with the applicable requirements of the Securities Laws and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading.
Since December 31, 1995, Target has not received from the SEC any comments, or
requests for additional information, with respect to any Target SEC Report.
SECTION 3.06 Real Property; Contracts and Leases Relating to Real
Property.
(a) The Target Disclosure Letter contains a true, correct and complete
list by street address of all of the real estate properties owned by Target. The
Target Disclosure Letter or the title reports and surveys with respect to the
real estate properties owned by Target listed in the Target Disclosure Letter
(collectively, the "Existing Target Title Documents") (in each case true,
correct and complete copies of which Existing Target Title Documents have been
delivered to Acquiror) set forth all improvements thereon (including, without
limitation, (i) the buildings and other structures and parking areas located
thereon and (ii) any easements, rights of way, privileges and appurtenances
thereto relating to such real estate properties). The real estate properties
owned by Target and improvements thereon (including, without limitation, (i) the
buildings and other structures and parking areas located thereon and (ii) any
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easements, rights of way, privileges and appurtenances thereto relating to such
real estate properties) are hereinafter referred to as the "Target Properties."
Except as set forth in the Target Disclosure Letter or in the Existing Target
Title Documents, Target owns fee simple title to each of the Target Properties,
free and clear of Encumbrances, and the Target Properties are not subject to any
rights of way, written agreements, or Property Laws (as defined below) affecting
building use or occupancy, or reservations of an interest in title
(collectively, "Property Restrictions") except for (i) Property Restrictions
imposed or promulgated by law or any Governmental Entity with respect to real
property, including, without limitation, zoning regulations, that, individually
or in the aggregate, do not materially and adversely affect the current use of
the property or materially detract from the value of the property and (ii)
Property Restrictions disclosed on the Existing Target Title Documents.
(b) To Target's knowledge, except as set forth in the Target Disclosure
Letter or in the Existing Target Title Documents, Target has (i) all
certificates, permits and licenses from all Governmental Entities having
jurisdiction over any of the Target Properties and (ii) all agreements,
easements and other rights, that are necessary to permit the lawful use and
operation of the buildings and improvements on any and all of the Target
Properties or are necessary to permit the lawful use and operation of all
driveways, roads and other means of egress and ingress to and from any and all
of the Target Properties (any such agreement, easement or other right referred
to in this clause (ii) shall hereafter be referred to as a "Target REA
Agreement") except, in the case of clauses (i) and (ii) of this paragraph, those
the failure to obtain of which could not reasonably be expected to have a Target
Material Adverse Effect. Each Target REA Agreement is in full force and effect,
and there is no pending threat of modification or cancellation of any of same.
Target is not, and to Target's knowledge no person has asserted, or is
threatening to assert, that Target is, in default under any Target REA Agreement
except for those which could not have a Target Material Adverse Effect.
(c) Except as set forth in the Target Disclosure Letter or in the
Existing Target Title Documents, to Target's knowledge, (i) the Target
Properties, and the size of, use of, occupancy of, improvements on, construction
on, and access to, the Target Properties (the "Target Property Uses"), are in
compliance in all material respects with all federal, state and municipal laws,
ordinances, orders, regulations, codes, zoning regulations, certificates,
permits, licenses and requirements, including, without limitation, those
relating to subdivision, building, safety, fire, health, and sewage connection,
treatment and disposal ("Property Laws"), affecting all or any portion of all or
any of the Target Properties; (ii) the Target Properties, and the Target
Property Uses, are not, and no person or Governmental Entity has asserted, or is
threatening to assert, that the Target Properties, or the Target Property Uses,
are, in violation of any Property Laws; (iii) there are no pending or threatened
proceedings or actions that could reasonably be expected to in any manner
materially and adversely affect the Target Property Uses; and (iv) to Target's
knowledge, no betterment assessments have been levied against, and no
condemnation or rezoning proceedings, or proceedings requiring any public
installations or improvements, are pending or threatened with respect to, any of
the Target Properties.
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(d) Except as set forth in the Target Disclosure Letter or in the
engineering reports, true, correct and complete copies of which Acquiror has
obtained prior to the date hereof, to Target's knowledge, (i) there is no Target
Property with building systems not in working order; (ii) there is no physical
damage to any Target Property in excess of $10,000 for which there is no
insurance in effect covering the full cost of the restoration, ordinary wear and
tear excepted; (iii) there are no structural defects relating to any of the
Target Properties; and (iv) there is no current renovation or restoration or
tenant improvements to any Target Property the cost of which exceeds $10,000.
(e) Target has delivered to Acquiror true, correct and complete copies
of (i) all of the following Contracts to which Target is a party relating to
real property owned or leased by Target: (A) all documents evidencing any
indebtedness secured by the Target Properties (the "Target Underlying Debt"),
(B) the Target Leases (as defined in Section 3.07), (C) all other service,
equipment, supply, maintenance, management and other Contracts providing for
payments in excess of $10,000 annually unless the same are terminable by Target
by notice of not more than 90 days for a cost of less than $10,000, (D)
outstanding Contracts relating to the development or construction of any Target
Properties, (E) all leases pursuant to which Target, as lessee, leases personal
property providing for payments in excess of $10,000 annually or leases real
property, (F) all outstanding options pursuant to which Target has granted, or
been granted, an option to purchase real property, and (G) any and all
amendments and supplements to all of the foregoing (collectively, as amended or
supplemented, the "Target Property Contracts"); (ii) all loan or credit
agreements, notes, debentures, bonds, mortgages, indentures, deeds of trust, or
Contracts, instruments or other obligations for borrowed money to which Target
is a party, and all amendments and supplements to all of the foregoing, (X)
pursuant to which any indebtedness of Target in excess of $10,000 is outstanding
or may be incurred or is evidenced or (Y) which may result in or evidences total
payments or liabilities to Target in excess of $10,000 (as amended or
supplemented, the "Target Loan Contracts"); and (iii) all joint venture,
shareholder agreements, operating agreements, partnership agreements or similar
Contracts to which Target is a party (together with the Target Property
Contracts and the Target Loan Contracts, as amended or supplemented, the "Target
Contracts"). For purposes of this Section 3.06, "indebtedness" shall mean, with
respect to any person, without duplication, (i) all indebtedness of such person
for borrowed money, whether secured or unsecured, (ii) all obligations of such
person under conditional sale or title retention agreements relating to property
purchased by such person, (iii) all capitalized lease obligations of such
person, (iv) all obligations of such person under interest rate or currency
hedging transactions (valued at the termination value thereof) and (v) all
guarantees of such person of any indebtedness of any other person. The Target
Disclosure Letter contains a true, correct and complete list of the Target
Contracts. The Target Contracts are valid, subsisting and in full force and
effect with respect to Target, and, to Target's knowledge, with respect to the
other parties to the Target Contracts. Target is not, and to Target's knowledge
no person has asserted, or is threatening to assert, that Target is, in material
default under any Target Contract providing for payments in excess of $10,000
annually. No existing use of any of the Target Properties constitutes, and to
Target's knowledge no person has asserted, or is threatening to assert, that
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any existing use of any of the Target Properties constitutes, a conflict with
any exclusive rights granted to any person under any of the Target Contracts
providing for payments in excess of $10,000 annually. To Target's knowledge, no
party to any Target Contract providing for payments in excess of $10,000
annually is in default under such Target Contract. To Target's knowledge, there
does not exist any condition which, with the giving of notice or the passage of
time or both, would cause such a violation or default under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, or result in the creation of any Encumbrances upon any
of the Target Properties under, or result in being declared void, voidable or
without further binding effect, any of the terms, conditions or provisions of
any Target Contract providing for payments in excess of $10,000 annually, or any
license, franchise, permit or concession or other instrument, or other
obligation to which Target is a party, or by which Target or any of the Target
Properties is bound or affected. None of the Target Contracts (other than the
Target Leases) contain any provision which would prevent the Acquiror or the
Surviving Corporation from occupying and using all or any portion of the Target
Properties, or any property or assets leased by Target, in the same manner and
on the same terms and conditions as Target is so occupying or using it.
(f) Target has delivered to Acquiror true, correct and complete copies
of (i) each permanent or temporary Certificate of Occupancy with respect to any
of the Target Properties which Target has in its possession and (ii) all
manufacturers' and contractors' warranties and guarantees currently in effect
with respect to the Target Properties which Target has in its possession.
(g) Each of the Target Properties is separately assessed for tax
purposes. Target has delivered to Acquiror true, correct and complete copies of
the most recent real estate tax bills for each of the Target Properties.
SECTION 3.07 Leases.
(a) The Target Disclosure Letter contains a true, correct and complete
rent roll for all leases, licenses and tenancies, each as amended and
supplemented ("Target Leases") covering all or each portion of the Target
Properties (the "Target Rent Roll"). The Target Rent Roll includes or describes
for each Target Lease, the name and address of the tenant, the space leased, the
current balances of security and other deposits, the current base rent the
tenant is obligated to pay thereunder, and the amount of percentage rent most
recently paid. Target has delivered to Acquiror a true, correct and complete
statement evidencing common area maintenance xxxxxxxx and real estate tax
escalations under each Target Lease.
(b) Except as set forth in the Target Disclosure Letter, (i) to
Target's knowledge, each of the Target Leases is valid and subsisting and in
full force and effect; (ii) no Tenant is controlled by, under common control
with or controls Target; (iii) the tenant under each of the Target Leases is in
actual possession of the leased premises; (iv) no tenant under any Target Lease
is in arrears for the payment of rent for any month preceding the month of the
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date of this Agreement or to Target's knowledge otherwise in default of such
tenant's lease obligations; (v) to Target's knowledge, no tenant under any
Target Lease intends to vacate prior to the termination of its lease; (vi) there
are no pending summary proceedings or other legal actions by Target for eviction
under any Target Lease; (vii) all decorating, repairs, alterations, or other
work required to be performed by Target under the Target Leases, or the costs to
be reimbursed to any tenant under any Target Lease, has been performed or, if
required, reimbursed; (viii) no space subject to any Target Lease is occupied
rent free or at a rental rate reduced from the rates stated in the Target Rent
Roll; and (ix) none of the Target Leases and none of the rents or other amounts
payable thereunder have been assigned, pledged or encumbered, other than to
lenders, except as described in the Target Disclosure Letter. Target has not
collected payment of rent (other than security deposits) accruing for a period
which is more than one month beyond the date of collection. All brokerage or
leasing commissions payable by the landlord with respect to Target Leases have
been paid in full and there are no commissions payable with respect to renewals
or extensions of any Target Lease. There are no material unsatisfied obligations
wherein rent and/or other obligations of the tenant in other buildings or
improvements have been assumed by Target.
(c) Except as shown in the Target Disclosure Letter, to Target's
knowledge, no tenant, licensee or occupant under any of the Target Leases has
notified Target in writing of any claim, offset or defense which would
materially affect the collection of rent from such tenant.
(d) The Target Disclosure Letter sets forth a true, correct and
complete list of all written or oral legally enforceable commitments made by
Target to lease any of the Target Properties or any portion thereof which has
not yet been reduced to a written lease. To Target's knowledge, no person has
asserted, or is threatening to assert, that any of such written or oral
commitments is not legally enforceable. Target has delivered to Acquiror true,
correct and complete copies of all such written commitments and the Target
Disclosure Letter provides with respect to each such oral commitment the
principal terms of such commitment, including, if applicable, those items set
forth in Section 3.07(a).
SECTION 3.08 Tenant Improvements. The Target Disclosure Letter contains
(i) a true, correct and complete list of all unpaid tenant improvements being
conducted by Target and (ii) to Target's knowledge, the aggregate amount of all
unpaid tenant improvements for all Target Properties do not exceed $25,000.
Target has delivered to Acquiror true, correct and complete copies of any and
all Contracts, plans, specifications and agreements in connection with all
uncompleted tenant improvements and all completed tenant improvements which have
not been fully paid for or with respect to which there exists a dispute between
Target, the tenant and/or any contractor or subcontractor with respect to such
improvements.
SECTION 3.09 Environmental Matters. Except as set forth in any of the
environmental assessments or other environmental reports (i) identified in the
Target Disclosure Letter and in the possession of Target with respect to the
Target Properties (the
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"Target Environmental Reports"), true, correct and complete copies of which have
been delivered to Acquiror or (ii) prepared for Acquiror with respect to the
Target Properties:
(a) the activities, operations and business carried out by Target at or
on the Target Properties are in compliance, in all material respects, with all
applicable federal, state or local environmental laws, ordinances, rules and
regulations including, without limitation, the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and Recovery
Act, as amended, and the rules and regulations adopted and promulgated pursuant
to each of the foregoing ("Environmental Laws");
(b) no lien has been imposed on the Target Properties by any federal,
state or local Governmental Entity in connection with a violation of any
Environmental Laws at or on the Target Properties;
(c) Target has no knowledge (i) of any pending or threatened litigation
or proceedings before any Governmental Entity in which any person or entity
alleges Target's violation or threatened violation of any Environmental Laws or
(ii) that any Governmental Entity has determined that Target is in violation of
any Environmental Laws in connection with the Target Properties; and
(d) to Target's knowledge, no hazardous substances ("Hazardous
Materials"), including, without limitation, any flammables, explosives,
radioactive materials, hazardous wastes, hazardous and toxic substances or
related materials, asbestos or any material containing asbestos (including,
without limitation, vinyl asbestos tile), or any other substance or material as
defined by any Environmental Laws as hazardous have been treated, stored or
disposed of, or otherwise deposited in or on the Target Properties, including,
without limitation, the surface waters and subsurface waters of the Target
Properties; no spills, releases, discharges, or disposals of Hazardous Materials
have occurred or are presently occurring on or from any of the Target
Properties, in violation of any Environmental Law; there are no substances or
conditions in or on the Target Properties or any other parcels of land which may
affect the Target Properties or the use thereof or which may support a claim or
cause of action under any Environmental Law. To Target's knowledge, there are no
underground tanks at the Target Properties and no part of the Target Properties
lies in a flood plain or constitutes "wetlands." Target is not aware of any
inaccuracies in the Target Environmental Reports. For purposes of this Section,
Hazardous Materials shall not include substances sold or used by tenants under
the Target Leases provided such use or sale is in the ordinary course of such
tenant's business and is in compliance with all applicable laws, rules or
regulations.
SECTION 3.10 Insurance. True and complete copies of all insurance
policies carried by Target or pursuant to which the Target Properties are
insured have been provided to Acquiror, all of such policies are in full force
and effect as of the date hereof, all premiums due and payable in respect of
such policies have been paid, and, except as set forth
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in the Target Disclosure Letter, no claims have been made against any such
policies as of the date hereof. Target has not received any written notice from
any insurance company which has issued a policy with respect to the Target
Properties or from any board of fire underwriters (or other body exercising
similar functions) (i) claiming any defects or deficiencies which have not been
cured or corrected, (ii) requesting the performance of any repairs, alterations
or other work which have not been performed, or (iii) stating, in effect, that
any of such policies will not be renewed or will be renewed at a higher premium
than is presently payable therefor.
SECTION 3.11 Absence of Certain Changes. Except as contemplated herein
or set forth in the Target Disclosure Letter, since September 30, 1996, (i)
Target has not suffered a Target Material Adverse Effect, or entered into any
transaction or conducted its business or operations other than in the ordinary
course of operating the Target Properties and other than in connection with
Target's exploration of alternatives leading to the execution of this Agreement,
(ii) Target has not entered into or made any Contract, borrowing, capital
expenditure or transaction (each, a "Commitment"), other than Commitments of not
more than $10,000 annually made in the ordinary course of operating the Target
Properties and (iii) Target has made no change in its accounting principles,
practices or methods.
SECTION 3.12 No Undisclosed Liabilities. Except as and to the extent
set forth or disclosed in the Target Disclosure Letter, the Target SEC Reports
or in this Agreement, (i) at September 30, 1996, Target did not have any
liabilities (whether absolute, accrued, asserted or unasserted, contingent or
otherwise), required by GAAP, consistently applied, to be reflected on a balance
sheet of Target, in excess of $10,000 in the aggregate, that were not reflected
on Target's September 30, 1996 balance sheet and (ii) since September 30, 1996,
Target has not incurred any liabilities (whether absolute, accrued, asserted or
unasserted, contingent or otherwise) which are required by GAAP, consistently
applied, to be reflected on a balance sheet of Target, except liabilities
incurred in the ordinary course of operating the Target Properties.
SECTION 3.13 Litigation. Except as set forth in the Target Disclosure
Letter, there are (i) no continuing orders, injunctions, judgements or decrees
of any court, arbitrator or other Governmental Entity, to which Target is a
party or by which any of the Target Properties are bound or, to Target's
knowledge, to which any of Target's directors, officers, employees or agents (in
each case, in his capacity as such) is a party or by which any of Target's
properties or assets are bound, that could reasonably be expected to have a
Target Material Adverse Effect or prevent or delay the consummation of Merger
and the other transactions contemplated by this Agreement and the Ancillary
Documents and (ii) there are no actions, suits or proceedings pending (or to
Target's knowledge, threatened), at law or in equity, against Target or, to
Target's knowledge, against any of Target's directors, officers, employees or
agents in their capacities as such, that seek equitable relief or claim damages
in excess of $10,000, or that could reasonably be expected to have a Target
Material Adverse Effect or prevent or delay the consummation of the Merger and
the other transactions
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contemplated by this Agreement and the Ancillary Documents, or result in the
rescission of the issuance of any Target Common Stock.
SECTION 3.14 Compliance with Applicable Law. To Target's knowledge,
Target is not in violation of any order of any Governmental Entity, or any law,
ordinance, governmental rule or regulation to which Target or any of the Target
Properties is subject, where such violation or violations could reasonably be
expected to have a Target Material Adverse Effect. Target has obtained all
licenses, permits and other authorizations and has taken all actions required by
applicable law or governmental regulations in connection with its business as
now conducted, where the failure to obtain any such item or items or to take any
such action could reasonably be expected to have a Target Material Adverse
Effect. Without limiting the generality of the foregoing, to Target's knowledge
neither Target nor (i) any consultant or employee or (ii) any person who is or
was an officer, director or affiliate of Target, has, directly or indirectly,
made, promised to make, or authorized the making of, an offer, payment or gift
of money or anything of value to any government official, political party or
employee, agent or fiduciary of a customer, to obtain a Contract for or to
influence a decision in favor of Target where such offer, payment or gift was or
would be, if made, in violation of any applicable law, ordinance, governmental
rule or regulation, nor have any of them maintained for this purpose cash or
anything of value, in an account or otherwise, not properly and accurately
accounted for on the books and records of Target.
SECTION 3.15 Taxes. (a) Except as set forth in the Target Disclosure
Letter, Target has timely filed all federal, state, local and foreign tax
returns required to be filed by it through the date hereof and such returns are
complete, accurate and comply with all applicable law in all material respects.
True, correct and complete copies of all federal, state, local and foreign tax
returns filed by Target and all communications relating thereto have been
delivered to Acquiror. Target has not executed or filed with any tax authority
any Contract now in effect extending the period for assessment or collection of
any income or other Taxes (as defined below), and no extension of time with
respect to any date on which a tax return was or is to be filed by Target is in
force. Except as set forth in the Target Disclosure Letter, Target is not a
party to any action or proceeding for assessment or collection of Taxes, and no
claim for assessment or collection of Taxes has been asserted or threatened
against it. There is no dispute or claim concerning any tax liability of Target
claimed by any tax authority. To Target's knowledge, no claim has ever been made
by a tax authority in a jurisdiction where Target does not file tax returns that
Target is or may be subject to taxation in such jurisdiction. There are no
security interests on any of the Target Properties that arose in connection with
any failure (or alleged failure) of Target to pay Taxes. Target has never
entered into a closing agreement pursuant to Section 7121 of the Code.
(b) Target has timely paid or caused to be paid all Taxes (as defined
below), including, without limitation, all transfer Taxes, if any, (i) shown as
due on its returns, (ii) which have become due and payable pursuant to any
assessment, deficiency notice, 30-day letter or other notice received by Target,
(iii) which became due and payable as a result of the
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transfer by Milestone Properties, Inc. ("Milestone") to Target of any assets or
properties, or the distribution by Milestone of Target Common Stock to the
stockholders of Milestone or (iv) are otherwise due and payable. Target has
properly accrued all Taxes for all periods subsequent to the periods covered by
such returns. Except as set forth in the Target Disclosure Letter, Target has
withheld from employees and paid over to the appropriate taxing authority all
income, social security, and other payroll Taxes required to be withheld and
paid over. For purposes of this Agreement, "Taxes" shall mean any and all taxes
(including, without limitation, transfer taxes), levies, duties or other
assessments in the nature of taxes imposed by any federal, state, local or
foreign taxing authority.
(c) Target is not a "foreign person" within the meaning of Section
1445(b)(2) of the Code and Target will furnish Acquiror at Closing with an
affidavit to that effect.
(d) Target has not (i) filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by Target or (ii) been a party to a tax sharing
agreement or similar arrangement.
(e) Target is not required and has not agreed to make any adjustments
pursuant to Section 481(a) of the Code or any similar provision of foreign,
state or local law by reason of a change in accounting method initiated by it or
any other relevant party, nor has any knowledge that the IRS or any taxing
authority has proposed any such adjustment or change in accounting method, nor
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that related to the business or assets of
Target.
(f) Target is not a party to any contract, agreement, plan or
arrangement covering any person that, individually or collectively, could give
rise to the payment of any amount that would not be deductible by reason of
Section 280G of the Code in connection with the Merger.
(g) Target has not been party to an election under Section 338 of the
Code and Target has no liability for the taxes of any person (other than Target)
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or otherwise.
SECTION 3.16 Financial Statements and Condition. Except as set forth in
the Target Disclosure Letter, Target's (i) audited balance sheets and related
statements of revenues, cash flow and stockholders' equity, including the notes
thereto, at and for the year ended December 31, 1995 (the "Target Financial
Statements") and (ii) unaudited balance sheet and related statements of income
and cash flows at and for the nine month period ended September 30, 1996 (the
"Target Interim Financial Statements") are attached to the Target Disclosure
Letter or attached to the Target SEC Reports. The Target Financial Statements
and the Target Interim Financial Statements present fairly, in all material
respects, Target's
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financial position and results of operations at the dates and for the periods
reflected therein, all in conformity with GAAP applied on a consistent basis,
except as otherwise noted therein or, in the case of the Target Interim
Financial Statements, for normal audit and accrual adjustments.
SECTION 3.17 Brokers or Finders. Except as set forth in the Target
Disclosure Letter, Target has not entered into any Contract with any agent,
broker, investment banker, financial advisor or other firm or person which may
result in the obligation of Target, Acquiror or Newco to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the Merger and the
other transactions contemplated by this Agreement and the Ancillary Documents.
Except as set forth in the Target Disclosure Letter, to Target's knowledge, no
claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments has been asserted in connection with the negotiations
leading to this Agreement or the consummation of the Merger and the other
transactions contemplated by this Agreement and the Ancillary Documents.
SECTION 3.18 Other Interests. Target does not own, directly or
indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust, or other person.
SECTION 3.19 Disclosure. The representations and warranties of Target
in this Agreement do not contain any untrue statement of a material fact.
SECTION 3.20 Vote Required. The affirmative vote of a majority of the
outstanding shares of Target Common Stock is the only vote of the holders of any
class or series of Target's capital stock necessary under applicable law to
permit the execution, delivery and performance by Target of this Agreement and
the Ancillary Documents to which Target is a party, and the consummation by
Target of the Merger and the other transactions contemplated by this Agreement
and the Ancillary Documents.
SECTION 3.21 Parent Shares. Except as set forth in this Agreement:
(a) Except as set forth in the Target Disclosure Letter, Target does
not, nor do any of its affiliates or associates, beneficially own any voting
shares of Acquiror, directly or indirectly.
(b) Target does not, nor do any of its affiliates or associates, (i)
have the right to acquire voting shares of Acquiror (whether such right is
exercisable immediately or only after the passage of time), pursuant to any
agreement, arrangement, or understanding (other than this Agreement) or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise; or (ii) have the right to vote voting shares of Acquiror pursuant to
any agreement, arrangement or understanding.
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(c) Target does not, nor do any of its affiliates or associates, have
any agreement, arrangement, or understanding for the purpose of acquiring,
holding, voting, or disposing of voting shares of Acquiror with any other person
or entity that beneficially owns, or whose affiliates or associates beneficially
own, directly or indirectly, such voting shares of Acquiror.
For purposes of this Section 3.21 only, (i) "affiliate" shall mean a
person or entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
a specified person or entity and (ii) "associate," when used to indicate a
relationship with any person or entity shall mean (A) any person or entity of
which such person or entity is an officer, director, or partner or is, directly
or indirectly, the beneficial owner of 10 percent or more of any class of equity
securities; or (B) any trust or other estate in which such person or entity has
a substantial beneficial interest or as to which such person or entity serves as
trustee or in a similar fiduciary capacity; or (C) any relative or spouse of
such person, or any relative of such spouse, who has the same home as such
person or who is a director or officer of the person or entity or any of its
affiliates.
SECTION 3.22 Target Preferred Stock. Target has paid all accrued and
payable dividends on the Target Preferred Stock pursuant to the terms of the
Target Preferred Stock through the date hereof.
SECTION 3.23 Employee Benefit Plans. Target has no employees. Target
has no employee benefits plans (within the meaning of Section 3(3) of ERISA) and
no other benefit arrangements covering employees of Target. Neither Target nor
any entity under common control with Target within the meaning of ERISA Section
4001 has contributed to, or been required to contribute to, any multiemployer
plan (as defined in Sections 3(37) and 4001(a)(3) of ERISA). Except as otherwise
required by Sections 601 through 608 of ERISA, Section 4980B of the Code and
applicable state laws, Target does not maintain or contribute to any plan or
arrangement which provides or has any liability to provide life insurance,
medical or other employee welfare benefits to any employee or former employee
upon his retirement or termination of employment and Target has never
represented, promised or contracted (whether in oral or written form) to any
employee or former employee that such benefits would be provided.
SECTION 3.24 Labor Matters. Target is not a party to, or bound by, any
collective bargaining agreement or other Contract with a labor union or labor
union organization. There is no unfair labor practice or labor arbitration
proceeding pending or, to Target's knowledge, threatened, against Target
relating to its business. To Target's knowledge, there are no organizational
efforts with respect to the formation of a collective bargaining unit presently
being made or threatened involving employees of Target.
SECTION 3.25 Related Party Transactions. Except as set forth in the
Target Disclosure Letter, Target has no arrangements, agreements or Contracts
with (i) any consultant or employee, (ii) any person who is an officer, director
or Affiliate of Target, any relative of any of the foregoing or any entity of
which any of the foregoing is an Affiliate,
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including, without limitation, those persons and entities listed as Affiliates
in the Target Disclosure Letter, or (iii) to Target's knowledge, any person who
owns more than 5% of the outstanding Target Common Stock (collectively, "Target
Affiliate Contracts"). Target has delivered to Acquiror true, correct and
complete copies of all Target Affiliate Contracts. Except as set forth in the
Target Disclosure Letter, Target has paid in full or otherwise satisfied and
discharged all obligations under the Target Affiliate Contracts that are due.
SECTION 3.26 Actions of Holders of Target Common Stock. The Target
Disclosure Letter sets forth a true, correct and complete list of the number of
shares of Target Common Stock held by each Affiliate of Target. From the date
hereof until the Effective Time, none of such Affiliates shall sell, transfer or
otherwise Encumber his shares of Target Common Stock. Notwithstanding the
foregoing, any Affiliate of Target may sell or transfer his shares of Target
Common Stock to another Affiliate of Target, provided that (i) the selling or
transferring Affiliate shall, within one business day after the date of such
sale or transfer, deliver to the Company written notice thereof and (ii) such
sale or transfer occurs at least two business days prior to the Closing Date.
Each of such persons shall, on or prior to the date hereof, have executed and
delivered a letter to Acquiror pursuant to which he shall agree to approve this
Agreement, the Merger and the transactions contemplated by this Agreement and
the Ancillary Documents at the Target Stockholders Meeting.
SECTION 3.27 Books and Records.
(a) The books of account and other financial records of Target (i)
accurately reflect in all material respects the financial transactions and
business of Target in accordance with GAAP, and (ii) are consistent in all
material respects with the financial statements included in the Target SEC
Reports.
(b) The minute books and other records of Target have been made
available to Acquiror, contain in all material respects accurate records of all
meetings and accurately reflect in all material respects all other corporate
action taken at such meeting or by unanimous consent of the stockholders and
directors of Target. There are no committees of the Board of Directors of
Target.
SECTION 3.28 Fairness Opinion. Target has received the opinion of
Societe Generale to the effect that the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents, and the
consideration to be paid by Acquiror to the holders of Target Common Stock
pursuant to the Merger and such other transactions, are fair to the holders of
Target Common Stock from a financial point of view.
SECTION 3.29 No Representation or Warranty. Except as set forth in this
Agreement, Target makes no representation or warranty as to the present or
former condition or uses of the Target Properties. Acquiror expressly waives any
claim whatsoever, except for breach of representation or warranty contained
herein, relating to or arising from the physical condition of the Target
Properties, including, without limitation, claims arising from the
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presence of any Hazardous Materials on, at or beneath the Target Properties or
otherwise arising under any Environmental Law, whether now or hereinafter in
force. Target is not liable or bound in any manner by expressed or implied
warranties, guaranties or representations pertaining to the Target Properties or
the Target Leases made or furnished by any real estate broker, investment
banker, agent, attorney, employee, servant or other person representing or
purporting to represent Target, unless the same are specifically set forth
herein.
SECTION 3.30 Obligations of Milestone. The Target Disclosure Letter
sets forth a true, correct and complete list of all guarantees and liabilities
of Milestone of any indebtedness or other obligations of Target in effect on the
date hereof (the "Milestone Obligations"). Target has delivered to Acquiror
true, correct and complete copies of all Milestone Obligations.
SECTION 3.31 Target Directors' and Officers' Liability Insurance
Policy. Target has delivered to Acquiror a true, correct and complete copy of
Target's directors' and officers' liability insurance policy, as currently in
effect (the "Existing Target D & O Liability Insurance Policy").
SECTION 3.32 South Carolina Outparcel Agreement. Target has delivered
to Acquiror a true, correct and complete copy of the Agreement to Sell and
Purchase Real Estate, dated December 1995, between Target and CPC-1, a South
Carolina limited liability company (the "South Carolina Outparcel Purchaser"),
and all amendments thereto (as amended, the "South Carolina Outparcel
Agreement"), concerning the sale by Target to the South Carolina Outparcel
Purchaser of the outparcel (the "South Carolina Outparcel") described in the
South Carolina Outparcel Agreement. Target has delivered to Acquiror true,
correct and complete copies of all documents filed with any court or served on
or by Target, or, to Target's knowledge, by any other person, in connection with
the action commenced by South Carolina Outparcel Purchaser relating to the South
Carolina Outparcel.
SECTION 3.33 Pending Milestone Action. Target has delivered to Acquiror
true, correct and complete copies of all documents filed with any court or
served on or by Target, or, to Target's knowledge, by any other person, in
connection with the Pending Milestone Action (as defined below) or any other
action or proceeding with respect to, or arising out of, the facts, events and
circumstances giving rise to the Pending Milestone Action.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND NEWCO
Acquiror and Newco, jointly and severally, represent and warrant to
Target as follows:
SECTION 4.01 Organization and Good Standing. (i) Acquiror is a real
estate investment trust duly formed and existing by virtue of the laws of the
State of Maryland and
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is in good standing with the State Department of Assessments and Taxation of
Maryland, (ii) Newco is a corporation duly incorporated, duly organized, validly
existing and in good standing under the laws of the State of Delaware, (iii)
each Acquiror Subsidiary is duly incorporated or formed, as the case may be,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and (iv) each of Acquiror, Newco and each
Acquiror Subsidiary, has all requisite trust or corporate or partnership power,
as the case may be, to own, operate, lease and Encumber its properties and
assets and to carry on its business as it is now being conducted. Each of
Acquiror, Newco and each Acquiror Subsidiary, is duly qualified or licensed to
do business as a foreign corporation or partnership, and is in good standing,
under the laws of each jurisdiction in which the character of the properties
owned, operated, leased or Encumbered by it therein or in which the carrying on
of its business makes such qualification or licensing necessary, except where
the failure to be so qualified, licensed or in good standing could not
reasonably be expected to have a Acquiror Material Adverse Effect. "Acquiror
Material Adverse Effect" means, with respect to the Company, any event or events
that could, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the business, assets, results of operations or
financial condition of the Company or the Acquiror Properties (as defined in
Section 4.06), taken as a whole. For the purposes of this Agreement, an Acquiror
Material Adverse Effect shall be deemed to have occurred to the extent that any
one or more events, individually or in the aggregate, could reasonably be
expected to (i) adversely affect Acquiror's gross revenues by $1,000,000 or more
during any 12-month period, or (ii) have a cost to remedy, or result in an
expense or liability to the Company, or acceleration of the payment of any
obligation of the Company (collectively, a "Company Remediation Cost"), of
$1,000,000 or more, or (iii) adversely affect the value of the Acquiror
Properties by $5,000,000 or more. The amounts (i) of any effect on Acquiror's
gross revenues, (ii) any Company Remediation Costs and (iii) any expenses or
liabilities to Target, the Company and Newco, in the case of each of clauses
(i), (ii) and (iii) that could reasonably be expected to result from such one or
more events, are hereinafter referred to as the "Acquiror Costs."
Notwithstanding the foregoing, an Acquiror Material Adverse Effect shall not be
deemed to have occurred if (A) any one or more of the events giving rise to a
Acquiror Cost or loss of value is covered by insurance and Acquiror has a right
to receive payments pursuant to such insurance policy as a result of such event
or events, (B) the aggregate amount of Acquiror Costs and/or loss of value does
not exceed $5,000,000 or $10,000,000, respectively, and (C) after giving effect
to the application of such insurance proceeds the aggregate amount of Acquiror
Costs and/or the loss of value, is less than $1,000,000 or $5,000,000,
respectively. Acquiror has delivered or made available to Target true, correct
and complete copies of its Declaration of Trust and Bylaws, and Newco's
Certificate of Incorporation and By-laws, each as amended to date. Any effects
on Acquiror's gross revenues or the value of the Acquiror Properties that is
attributable to any default, diminution of rent or rejection under any Acquiror
Lease by any tenant that is the subject of any bankruptcy proceedings on the
date hereof shall not be included in any determination of whether an Acquiror
Material Adverse Effect has occurred or in any calculation of Acquiror Costs.
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SECTION 4.02 Capitalization of Acquiror and Newco. The authorized
shares of beneficial interest of Acquiror consist of 100,000,000 shares of
beneficial interest. As of the date hereof, there were 10,332,784 issued and
outstanding shares of common stock, par value $.01 per share, of Acquiror (the
"Acquiror Common Shares") and (ii) (x) 11,155 issued and outstanding shares of
Series A Increasing Rate Cumulative Convertible Preferred Shares of Acquiror
(the "Acquiror Series A Preferred Shares") or (y) 11,155 issued and outstanding
shares of Series A-1 Increasing Rate Cumulative Convertible Preferred Shares of
Acquiror (the "Acquiror Series A-1 Preferred Shares"). The Acquiror Disclosure
Letter (as defined below) sets forth a true, correct and complete list of all
Acquiror Subsidiaries and the direct or indirect ownership interest of Acquiror
in each of such Acquiror Subsidiaries. The shares or interests of each Acquiror
Subsidiary owned by Acquiror are free and clear of Encumbrances and Acquiror has
good title to such shares or interests. All of the issued and outstanding shares
of beneficial interest of Acquiror have been duly authorized and are validly
issued, fully paid and nonassessable and are free of preemptive rights, except
that shareholders may be subject to further assessment with respect to claims
for tort, contract, taxes, statutory liability and otherwise in some
jurisdictions to the extent such claims are not satisfied by Acquiror. Acquiror
has no outstanding bonds, debentures, notes, or other obligations the holders of
which have the right to vote (or are convertible into or exercisable for
securities having the right to vote) with the holders of Acquiror Common Shares
on any matter. Except as set forth in the Disclosure Letter delivered by
Acquiror to Target simultaneously with the execution and delivery of this
Agreement (the "Acquiror Disclosure Letter"; together with the Target Disclosure
Letter, the "Disclosure Letters"), Acquiror does not have and is not bound by,
and at the Effective Time, will not have or be bound by, any outstanding
subscriptions, options, warrants, calls, convertible securities, rights, or
other Contracts of any character, to or by which Acquiror or Newco is a party or
is bound, which, directly or indirectly, obligate Acquiror or Newco to issue,
deliver, transfer or sell any shares of beneficial interest of Acquiror or any
other equity or debt security of Acquiror except (i) Acquiror Common Shares
issuable upon the conversion of the Acquiror Series A Preferred Shares or
Acquiror Series A-1 Preferred Shares and (ii) Acquiror Common Shares issuable
upon the exercise of stock options issued to employees and trustees pursuant to
Acquiror's 1992 Employee Share Option Plan, 1992 Trustee Share Option Plan and
the 1995 Management Incentive Plan or issued to Acquiror's trustees in lieu of
payment of trustee fees. At the date hereof and on the Closing Date, all of the
issued and outstanding shares of common stock of Newco are and will be owned by
Acquiror.
SECTION 4.03 Authority of Acquiror and Newco. Each of Acquiror and
Newco has all requisite trust or corporate power and authority, as the case may
be, to execute and deliver this Agreement and the Ancillary Documents to which
it is a party, and needed to consummate the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents, and to take all
other actions required to be taken by it pursuant to the provisions hereof and
the Ancillary Documents. The execution, delivery and performance by each of
Acquiror and Newco of this Agreement and the Ancillary Documents to which it is
a party, the consummation by each of Acquiror and Newco of the Merger and the
other transactions contemplated by this Agreement and the Ancillary Documents,
have been duly
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and validly authorized and approved by all requisite corporate action of
Acquiror and Newco and no other corporate proceedings on the part of Acquiror or
Newco are necessary to authorize the execution, delivery and performance of this
Agreement or any of the Ancillary Documents, to consummate the Merger and the
other transactions contemplated by this Agreement and the Ancillary Documents.
This Agreement and each of the Ancillary Documents to which Acquiror or Newco is
a party have been duly and validly executed and delivered by Acquiror or Newco,
as the case may be, and constitute valid and binding agreements of Acquiror or
Newco, as the case may be, enforceable against Acquiror or Newco, as the case
may be, in accordance with their respective terms, except as may be limited by
bankruptcy and other laws affecting the enforceability of creditors' rights
generally or laws governing the availability of specific performance or other
equitable remedies, or restrictions of the enforcement of securities
indemnification and contribution provisions imposed by public policy.
The issuance by Acquiror of shares of Acquiror Series B
Preferred Shares and Acquiror Series C Preferred Shares in connection with the
Merger (i) will not be subject to preemptive rights or other preferential rights
of any present or future stockholders of Acquiror, and (ii) will not result in a
change in conversion rights in any of Acquiror's options, warrants or other
securities.
SECTION 4.04 Consents and Approvals; No Violations. Except as set forth
in the Acquiror Disclosure Letter and for applicable requirements of the 1933
Act, the 1934 Act, state Blue Sky laws, the HSR Act, if any, the filing and
recordation of the Delaware Merger Certificate and the Target Required Filings,
no filing or registration with, and no consent, authorization, declaration or
approval of, any Governmental Entity, or any third party, is necessary for the
execution, delivery and performance by Acquiror or Newco of this Agreement or
any of the Ancillary Documents or the consummation of the Merger and the other
transactions contemplated by this Agreement and the Ancillary Documents. Except
as set forth in the Acquiror Disclosure Letter, neither the execution, delivery
and performance by Acquiror or Newco of this Agreement or any of the Ancillary
Documents nor the consummation by Acquiror or Newco of the Merger and the other
transactions contemplated by this Agreement and the Ancillary Documents will (i)
constitute any violation or breach of any provision of the charter documents of
Acquiror or Newco, or (ii) constitute any violation or breach of any provision
of, or constitute a default (or an event which, with the giving of notice or the
passage of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, or result in the creation of any Encumbrances upon any
of the properties of the Company under, or result in being declared void,
voidable or without further binding effect, any of the terms, conditions or
provisions of any Acquiror Contract (as defined below), or any license,
franchise, permit, concession, lease, Contract, or other instrument, or other
obligation to which the Company is a party, or by which the Company or any of
its properties is bound or affected, except with respect to clause (ii), for
those which could not have an Acquiror Material Adverse Effect.
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SECTION 4.05 Public Reports. Acquiror has delivered or made available
to Target true, correct and complete copies of (i) its Annual Report on Form
10-K for the year ended December 31, 1995, (ii) its Quarterly Report on Form
10-Q for the three months ended Xxxxx 00, 0000, (xxx) its Quarterly Report on
Form 10-Q for the six months ended June 30, 1996, (iv) its Quarterly Report on
Form 10-Q for the nine months ended September 30, 1996 and (v) those other
registration statements, reports, proxy statements, information statements and
other documents filed by Acquiror with the SEC that are listed in the Acquiror
Disclosure Letter; in each case including all exhibits, amendments and
supplements thereto and each of such documents is in the form (including
exhibits, amendments and supplements thereto) filed with the SEC (collectively,
the "Acquiror SEC Reports"). Each of the Acquiror SEC Reports was filed with the
SEC in a timely manner. The Acquiror SEC Reports constitute all registration
statements, reports, proxy statements, information statements and other
documents required to be filed by Acquiror since December 31, 1995 under the
Securities Laws. As of their respective dates, the Acquiror SEC Reports (i)
complied in all material respects with the applicable requirements of the
Securities Laws and (ii) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading. Since December 31, 1995, Acquiror has not received
from the SEC any comments, or requests for additional information, with respect
to any Acquiror SEC Report.
SECTION 4.06 Real Property; Contracts and Leases Relating to Real
Property.
(a) The Acquiror Disclosure Letter contains a true, correct and
complete list by street address of all of the real estate properties owned by
the Company. The Acquiror Disclosure Letter or the existing title reports and
surveys with respect to the real estate properties owned by Acquiror listed in
the Acquiror Disclosure Letter (the "Existing Acquiror Title Documents") (in
each case true, correct and complete copies of which Existing Acquiror Title
Documents have been made available to Target) set forth any improvements thereon
(including, without limitation, (i) the buildings and other structures and
parking areas located thereon and (ii) any easements, rights of way, privileges
and appurtenances thereto relating to such real estate properties). The real
estate properties owned by the Company and improvements thereon (including,
without limitation, (i) the buildings and other structures and parking areas
located thereon and (ii) any easements, rights of way, privileges and
appurtenances thereto relating to such real estate properties) are hereinafter
referred to as the "Acquiror Properties". Except as set forth in the Acquiror
Disclosure Letter or the Existing Acquiror Title Documents, the Company owns fee
simple title to each of the Acquiror Properties, free and clear of Encumbrances,
and the Acquiror Properties are not subject to any Property Restrictions except
for (i) Property Restrictions imposed or promulgated by law or any Governmental
Entity with respect to real property, including, without limitation, zoning
regulations, that, individually or in the aggregate, do not materially and
adversely affect the current use of the property or materially detract from the
value of the property and (ii) Property Restrictions contained in leases to
tenants at Acquiror Properties.
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(b) To Acquiror's knowledge, except as set forth in the Acquiror
Disclosure Letter or in the Existing Acquiror Title Documents, the Company has
(i) all certificates, permits or licenses from all Governmental Entities having
jurisdiction over any or all of the Acquiror Properties and (ii) all agreements,
easements and other rights, that are necessary to permit the lawful use and
operation of the buildings and improvements on any and all of the Acquiror
Properties or are necessary to permit the lawful use and operation of all
driveways, roads and other means of egress and ingress to and from any and all
of the Acquiror Properties (any such agreement, easement or other right referred
to in this clause (ii) shall hereafter be referred to as an "Acquiror REA
Agreement") except, in the case of clauses (i) and (ii) of this paragraph, those
the failure to obtain of which could not reasonably be expected to have an
Acquiror Material Adverse Effect. Each Acquiror REA Agreement is in full force
and effect, and there is no pending threat of modification or cancellation of
any of same. The Company is not, and to Acquiror's knowledge no person has
asserted, or is threatening to assert, that the Company is, in default under any
Acquiror REA Agreement except for those which could not reasonably be expected
to have an Acquiror Material Adverse Effect.
(c) Except as set forth in the Acquiror Disclosure Letter or in the
Existing Acquiror Title Documents, to Acquiror's knowledge, (i) the Acquiror
Properties, and the size of, use of, occupancy of, improvements on, construction
on, and access to, the Acquiror Properties (the "Acquiror Property Uses"), are
in compliance in all material respects with all Property Laws affecting all or
any portion of all or any of the Acquiror Properties; (ii) the Acquiror
Properties, and the Acquiror Property Uses, are not, and no person or
Governmental Entity has asserted, or is threatening to assert, that the Acquiror
Properties, or the Acquiror Property Uses, are, in violation of any Property
Laws; (iii) there are no pending or threatened proceedings or actions that could
reasonably be expected to in any manner materially and adversely affect the
Acquiror Property Uses; (iv) no betterment assessments have been levied against,
and no condemnation or rezoning proceedings, or proceedings requiring any public
installations or improvements, are pending or threatened with respect to, any of
the Acquiror Properties; and (v) all charges and fees for all certificates,
permits, licenses and approvals referred to in this paragraph have been paid.
(d) Except as set forth in the Acquiror Disclosure Letter, to
Acquiror's knowledge, (i) there is no Acquiror Property with building systems
not in working order; (ii) there is no physical damage to any Acquiror Property
in excess of $10,000 for which there is no insurance in effect covering the full
cost of the restoration, ordinary wear and tear excepted; (iii) there are no
structural defects relating to any of the Acquiror Properties; and (iv) there is
no current renovation or restoration or tenant improvements to any Acquiror
Property the cost of which exceeds $10,000.
(e) Acquiror has made available to Target true, correct and complete
copies of (i) all loan or credit agreements, notes, debentures, bonds,
mortgages, indentures and deeds of trust, and all amendments and supplements to
all of the foregoing, (X) pursuant to which any indebtedness of the Company in
excess of $100,000 is outstanding or may be incurred or is evidenced or (Y)
which may result in or evidences total payments or liabilities to the
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Company in excess of $100,000 and (ii) all joint venture, shareholder
agreements, operating agreements, partnership agreements or similar Contracts to
which the Company is a party (together with the Contracts referred to in clause
(i) of this Section 4.06(e), as amended or supplemented, the "Acquiror
Contracts"). For purposes of this Section 4.06, "indebtedness" shall mean, with
respect to any person, without duplication, (i) all indebtedness of such person
for borrowed money, whether secured or unsecured, (ii) all obligations of such
person under conditional sale or title retention agreements relating to property
purchased by such person, (iii) all capitalized lease obligations of such
person, (iv) all obligations of such person under interest rate or currency
hedging transactions (valued at the termination value thereof) and (v) all
guarantees of such person of any indebtedness of any other person. The Acquiror
Disclosure Letter contains a true, correct and complete list of the Acquiror
Contracts. The Acquiror Contracts are valid, subsisting and in full force and
effect with respect to the Company, and, to the Company's knowledge, with
respect to the other parties to the Acquiror Contracts. The Company is not, and
to Acquiror's knowledge no person has asserted, or is threatening to assert,
that the Company is, in material default under any Acquiror Contract providing
for payments in excess of $10,000 annually. No existing use of any of the
Acquiror Properties constitutes, and to Acquiror's knowledge no person has
asserted, or is threatening to assert, that any existing use of any of the
Acquiror Properties constitutes, a conflict with any exclusive rights granted to
any person under any of the Acquiror Contracts providing for payments in excess
of $10,000 annually. To Acquiror's knowledge, no party to any of the Acquiror
Contracts providing for payments in excess of $10,000 annually is in default
under such Acquiror Contract. To Acquiror's knowledge, there does not exist any
condition which, with the giving of notice or the passage of time or both, would
cause such a violation or default under, or result in the termination or in a
right of termination or cancellation of, or accelerate the performance required
by, or result in the creation of any Encumbrances upon any of the Acquiror
Properties under, or result in being declared void, voidable or without further
binding effect, any of the terms, conditions or provisions of any Acquiror
Contract providing for payments in excess of $10,000 annually, or any material
license, franchise, permit or concession or other instrument, or other
obligation to which the Company is a party, or by which the Company or any of
the Acquiror Properties is bound or affected.
SECTION 4.07 Leases.
(a) The Acquiror Disclosure Letter contains a true, correct and
complete rent roll for all leases, licenses and tenancies, each as amended and
supplemented ("Acquiror Leases") covering all or each portion of the Acquiror
Properties (the "Acquiror Rent Roll"). The Acquiror Rent Roll includes or
describes for each Acquiror Lease, the name of the tenant, the space leased the
current balances of security and other deposits, the current base rent the
tenant is obligated to pay thereunder, and the amount of percentage rent most
recently paid.
(b) Except as set forth in the Acquiror Disclosure Letter, (i) to
Acquiror's knowledge, each of the Acquiror Leases is valid and subsisting and in
full force and effect; (ii) no tenant is controlled by, under common control
with or controls the Company; (iii) the
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tenant under each of the Acquiror Leases is in actual possession of the leased
premises; (iv) no tenant under any Acquiror Lease is in arrears for the payment
of rent for any month preceding the month of the date of this Agreement or, to
Acquiror's knowledge, otherwise in default of such tenant's lease obligations;
(v) to Acquiror's knowledge, no tenant under any Acquiror Lease intends to
vacate prior to the termination of its lease; (vi) there are no pending summary
proceedings or other legal actions by Acquiror for eviction under any Acquiror
Lease; (vii) all decorating, repairs, alterations, or other work required to be
performed by the Company under the Acquiror Leases, or the costs to be
reimbursed to any tenant under any Acquiror Lease, has been performed or, if
required, reimbursed; (viii) no space subject to any Acquiror Lease is occupied
rent free or at a rental rate reduced from the rates stated in the Acquiror Rent
Roll; and (ix) none of the Acquiror Leases and none of the rents or other
amounts payable thereunder have been assigned, pledged or encumbered, other than
to lenders, as described in the Acquiror Disclosure Letter. Except as set forth
in the Acquiror Disclosure Letter, the Company has not collected payment of rent
(other than security deposits) accruing for a period which is more than one
month beyond the date of collection. There are no material unsatisfied
obligations wherein rent and/or other obligations of the tenant in other
buildings or improvements have been assumed by the Company.
SECTION 4.08 Environmental Matters. Except as set forth in any of the
environmental assessments or other environmental reports identified in the
Acquiror Disclosure Letter and in the possession of the Company with respect to
the Acquiror Properties (the "Acquiror Environmental Reports"), true, correct
and complete copies of which have been made available to Target:
(a) the activities, operations and business carried out by the Company
at or on the Acquiror Properties are and have been in compliance, in all
material respects, with all applicable Environmental Laws;
(b) no lien has been imposed on the Acquiror Properties by any federal,
state or local Governmental Entity in connection with a violation of any
Environmental Laws at or on the Acquiror Properties;
(c) Acquiror has no knowledge (i) of any pending or threatened
litigation or proceedings before any Governmental Entity in which any person or
entity alleges the Company's violation or threatened violation of any
Environmental Laws or (ii) that any Governmental Entity has determined that the
Company is in violation of any Environmental Laws in connection with the
Acquiror Properties; and
(d) to Acquiror's knowledge, no Hazardous Materials have been treated,
stored or disposed of, or otherwise deposited in or on the Acquiror Properties,
including, without limitation, the surface waters and subsurface waters of the
Acquiror Properties; no spills, releases, discharges, or disposals of Hazardous
Materials have occurred or are presently occurring on or from any of the
Acquiror Properties, in violation of any Environmental Law; there are no
substances or conditions in or on the Acquiror Properties or any other parcels
of
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land which may affect the Acquiror Properties or the use thereof or which may
support a claim or cause of action under any Environmental Law. To Acquiror's
knowledge, except as set forth in the Acquiror Disclosure Letter, there are no
underground tanks at the Acquiror Properties and no part of the Acquiror
Properties lies in a flood plain or constitutes "wetlands." Acquiror is not
aware of any inaccuracies in the Acquiror Environmental Reports. For purposes of
this Section, Hazardous Materials shall not include substances sold or used by
tenants under the Acquiror Leases provided such use or sale is in the ordinary
course of such tenant's business and is in compliance with all applicable laws,
rules or regulations.
SECTION 4.09 Insurance. True and complete copies of insurance policies
carried by the Company or pursuant to which the Acquiror Properties are insured
have been made available to Target, all of such policies are in full force and
effect as of the date hereof, all premiums due and payable in respect of such
policies have been paid, and, except as set forth in the Acquiror Disclosure
Letter, no claims have been made against any such policies as of the date
hereof. The Company has not received any written notice from any insurance
company which has issued a policy with respect to the Acquiror Properties or
from any board of fire underwriters (or other body exercising similar functions)
(i) claiming any defects or deficiencies which have not been cured or corrected,
(ii) requesting the performance of any repairs, alterations or other work which
have not been performed, or (iii) stating, in effect, that any of such policies
will not be renewed or will be renewed at a higher premium than is presently
payable therefor.
SECTION 4.10 Absence of Certain Changes. Except as disclosed in the
Acquiror SEC Reports, since September 30, 1996, (i) the Company has not suffered
a Acquiror Material Adverse Effect, or entered into any transaction or conducted
its business or operations other than in the ordinary course of the Company's
business and other than in connection with Acquiror's exploration of
alternatives leading to the execution of this Agreement and (ii) Acquiror has
made no change in its accounting principles, practices or methods.
SECTION 4.11 No Undisclosed Liabilities. Except as and to the extent
set forth or disclosed in the Acquiror Disclosure Letter, the Acquiror SEC
Reports or in this Agreement, (i) at September 30, 1996, the Company did not
have any liabilities (whether absolute, accrued, asserted or unasserted,
contingent or otherwise), required by GAAP, consistently applied, to be
reflected on a balance sheet of Acquiror, in excess of $50,000 in the aggregate,
that were not reflected on Acquiror's September 30, 1996 balance sheet and (ii)
since September 30, 1996, the Company has not incurred any liabilities (whether
absolute, accrued, asserted or unasserted, contingent or otherwise) which are
required by GAAP, consistently applied, to be reflected on a balance sheet of
Acquiror, except liabilities incurred in the ordinary course of the Company's
business.
SECTION 4.12 Litigation. There are (i) no continuing orders,
injunctions, judgements or decrees of any court, arbitrator or other
Governmental Entity, to which the Company is a party or by which any of the
Acquiror Properties are bound or, to Acquiror's
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knowledge, to which any of Acquiror's directors, officers, employees or agents
(in each case, in his capacity as such) is a party or by which any of the
Company's properties or assets are bound, that could reasonably be expected to
have a Acquiror Material Adverse Effect or prevent or delay the consummation of
Merger and the other transactions contemplated by this Agreement and the
Ancillary Documents and (ii) there are no actions, suits or proceedings pending
(or to Acquiror's knowledge, threatened), at law or in equity, against the
Company or, to Acquiror's knowledge, against any of Acquiror's or any Acquiror
Subsidiary's directors, officers, employees or agents in their capacities as
such, that seek equitable relief or claim damages in excess of $10,000, or that
could reasonably be expected to have a Acquiror Material Adverse Effect or
prevent or delay the consummation of the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents.
SECTION 4.13 Compliance with Applicable Law. To Acquiror's knowledge,
the Company is not in violation of any order of any Governmental Entity, or any
law, ordinance, governmental rule or regulation to which the Company or any of
the Acquiror Properties is subject, where such violation or violations could
reasonably be expected to have a Acquiror Material Adverse Effect. The Company
has obtained all licenses, permits and other authorizations and has taken all
actions required by applicable law or governmental regulations in connection
with its business as now conducted, where the failure to obtain any such item or
items or to take any such action could reasonably be expected to have a Acquiror
Material Adverse Effect. Without limiting the generality of the foregoing, to
Acquiror's knowledge neither the Company nor (i) any consultant or employee or
(ii) any person who is or was an officer, director or Affiliate of the Company,
has, directly or indirectly, made, promised to make, or authorized the making
of, an offer, payment or gift of money or anything of value to any government
official, political party or employee, agent or fiduciary of a customer, to
obtain a Contract for or to influence a decision in favor of the Company where
such offer, payment or gift was or would be, if made, in violation of any
applicable law, ordinance, governmental rule or regulation, nor have any of them
maintained for this purpose cash or anything of value, in an account or
otherwise, not properly and accurately accounted for on the books and records of
Acquiror.
SECTION 4.14 Taxes. Acquiror and each Acquiror Subsidiary has timely
filed all federal, state, local and foreign tax returns required to be filed by
it through the date hereof and such returns are complete, accurate and comply
with all applicable law in all material respects. True, correct and complete
copies of all federal, state, local and foreign tax returns filed by Acquiror
and each Acquiror Subsidiary and all communications relating thereto have been
delivered or made available to Target. Neither Acquiror nor any Acquiror
Subsidiary has executed or filed with any tax authority any Contract now in
effect extending the period for assessment or collection of any income or other
Taxes, and no extension of time with respect to any date on which a tax return
was or is to be filed by Acquiror or any Acquiror Subsidiary is in force. Except
as set forth in the Acquiror Disclosure Letter, neither Acquiror nor any
Acquiror Subsidiary is a party to any action or proceeding for assessment or
collection of Taxes, and no claim for assessment or collection of Taxes has been
asserted or threatened against Acquiror or any Acquiror Subsidiary. There is no
dispute or claim
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concerning any tax liability of Acquiror or any Acquiror Subsidiary claimed by
any tax authority. To the Company's knowledge, no claim has ever been made by a
tax authority in a jurisdiction where Acquiror or any Acquiror Subsidiary does
not file tax returns that Acquiror or any Acquiror Subsidiary is or may be
subject to taxation in such jurisdiction. There are no security interests on any
of the Acquiror Properties that arose in connection with any failure (or alleged
failure) of Acquiror or any Acquiror Subsidiary to pay Taxes. Acquiror and each
Acquiror Subsidiary has never entered into a closing agreement pursuant to
Section 7121 of the Code.
Acquiror and each Acquiror Subsidiary has timely paid or
caused to be paid all Taxes (i) shown as due on its returns, (ii) which have
become due and payable pursuant to any assessment, deficiency notice, 30-day
letter or other notice received by Acquiror or such Acquiror Subsidiary, or
(iii) are otherwise due and payable. Acquiror and each Acquiror Subsidiary has
properly accrued all Taxes for all periods subsequent to the periods covered by
such returns. Except as set forth in the Acquiror Disclosure Letter, Acquiror
and each Acquiror Subsidiary has withheld from employees and paid over to the
appropriate taxing authority all income, social security, and other payroll
Taxes required to be withheld and paid over.
Acquiror has (i) elected to be taxed as a REIT within the
meaning of the Code and has qualified as a REIT for 1995, and has complied with
all applicable laws, rules and regulations, including, without limitation, the
Code, relating to, its REIT status in 1995, (ii) has operated and intends to
continue to operate, in such a manner as to qualify as a REIT for 1996, and
(iii) has not taken or omitted to take any action which could result in, and the
executive officers of Acquiror have not received written notice of and have no
actual knowledge of, a challenge to its status as a REIT. Acquiror represents
that Newco and each of the other Acquiror Subsidiaries are qualified REIT
subsidiaries as defined in Section 856(i)(2) of the Code.
SECTION 4.15 Financial Statements and Condition. The financial
statements included in the Acquiror SEC Reports (the "Acquiror Financial
Statements") present fairly, in all material respects, the Company's financial
position and results of operations at the dates and for the periods reflected
therein, all in conformity with GAAP applied on a consistent basis, except as
otherwise noted therein and for normal audit and accrual adjustments.
SECTION 4.16 Newco. Newco was formed solely for the purpose of engaging
in the transactions hereby contemplated, 100% of Newco's outstanding stock is,
has been and will be owned by Acquiror at all times during the period of Newco's
existence, and Newco has engaged in no other business activities and has
conducted its operations only as hereby contemplated.
SECTION 4.17 Brokers or Finders. Except as set forth in the Acquiror
Disclosure Letter, Acquiror has not entered into any Contract with any agent,
broker, investment banker, financial advisor or other firm or person which may
result in the obligation of Target,
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Acquiror or Newco to pay any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents. Except as set forth
in the Acquiror Disclosure Letter, to Acquiror's knowledge, no claim for payment
of any finder's fees, brokerage or agent's commissions or other like payments
has been asserted in connection with the negotiations leading to this Agreement
or the consummation of the Merger and the other transactions contemplated by
this Agreement and the Ancillary Documents.
SECTION 4.18 Other Interests. Except as set forth in the Acquiror
Disclosure Letter, neither the Acquiror nor any Acquiror Subsidiary owns,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust, or entity. With
respect to such interests, the Acquiror or Acquiror Subsidiary is a partner or
shareholder in good standing, owns such interests free and clear of all
Encumbrances, is not in breach of any provision of any Contract governing the
Acquiror's or Acquiror Subsidiary's rights, as the case may be, in or to the
interests owned or held, all of which Contracts are set forth in the Acquiror
Disclosure Letter, are unmodified as described thereon, and are in full force
and effect and, to Acquiror's knowledge, the other parties to such Contracts are
not in breach of any of their respective obligations under such Contracts.
SECTION 4.19 Disclosure. The representations and warranties of Acquiror
and Newco in this Agreement do not contain any untrue statement of a material
fact.
SECTION 4.20 Employee Benefit Plans. All employee benefits plans
(within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) and other benefit arrangements covering
employees of the Company (the "Company Benefit Plans") are listed in the
Acquiror Disclosure Letter. Acquiror has delivered or made available to Target
true, correct and complete copies of the Company Benefit Plans. To the extend
applicable, the Company Benefit Plans have been administered in all material
respects in accordance with their terms and comply, in all material respects,
with the applicable requirements of ERISA and the Code. Any Company Benefit plan
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service (the "IRS") or
a determination letter request has been filed with the IRS with respect to any
such plan and is still pending. No Company Benefit Plan is covered by Title IV
of ERISA or Section 412 of the Code. Neither any Company Benefit Plan nor the
Company has incurred any liability or penalty under Section 4975 of the Code or
Section 502(i) of ERISA. There are no pending or anticipated claims against or
otherwise involving any of the Company Benefit Plans and no suit, action or
other litigation (excluding claims for benefits incurred in the ordinary course
of Company Benefit Plan activities) has been brought against or with respect to
any such Company Benefit Plan. All material contributions required to be made as
of the date hereof to the Company Benefit Plans have been made or provided for.
The Company has no unfunded liabilities under any Company Benefit Plan, except
as set forth in the Acquiror Disclosure Letter. Neither the Company nor any
entity under common control with the Company within the
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meaning of ERISA Section 4001 has contributed to, or been required to contribute
to, any multiemployer plan (as defined in Sections 3(37) and 4001(a)(3) of
ERISA). Except as otherwise required by Sections 601 through 608 of ERISA,
Section 4980B of the Code and applicable state laws, the Company does not
maintain or contribute to any plan or arrangement which provides or has any
liability to provide life insurance, medical or other employee welfare benefits
to any employee or former employee upon his retirement or termination of
employment and the Company has never represented, promised or contracted
(whether in oral or written form) to any employee or former employee that such
benefits would be provided. Except as disclosed in the Acquiror Disclosure
Letter, the execution and delivery of this Agreement, and the consummation of
the transactions contemplated by this Agreement and the Ancillary Documents,
will not constitute an event under any Company Benefit Plan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligations to fund benefits with respect to any employee, director or
consultant of the Company.
SECTION 4.21 Labor Matters. The Company is not a party to, or bound by,
any collective bargaining agreement or other Contract with a labor union or
labor union organization. There is no unfair labor practice or labor arbitration
proceeding pending or, to Acquiror's knowledge, threatened, against the Company
relating to its business. To Acquiror's knowledge, there are no organizational
efforts with respect to the formation of a collective bargaining unit presently
being made or threatened involving employees of the Company.
SECTION 4.22 Related Party Transactions. Except as set forth in the
Acquiror Disclosure Letter, the Company has no arrangements, agreements or
Contracts with (i) any consultant or employee, (ii) any person who is an
officer, director or affiliate of Acquiror or any Acquiror Subsidiary, any
relative of any of the foregoing or any entity of which any of the foregoing is
an affiliate or (iii) to Acquiror's knowledge, any person who owns more than 5%
of the outstanding Acquiror Common Shares (collectively, "Acquiror Affiliate
Contracts"). Acquiror has delivered or made available to Target true, correct
and complete copies of all Acquiror Affiliate Contracts.
SECTION 4.23 Books and Records.
(a) The books of account and other financial records of Acquiror (i)
accurately reflect in all material respects the financial transactions and
business of the Company in accordance with GAAP, and (ii) are consistent in all
material respects with the financial statements included in the Acquiror SEC
Reports.
(b) The minute books and other records of Acquiror have been made
available to Target, contain in all material respects accurate records of all
meetings and accurately reflect in all material respects all other corporate
action taken at such meeting or by unanimous
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consent of the shareholders and trustees and all committees of the Board of
Trustees of Acquiror.
SECTION 4.24 No Representation or Warranty. Except as set forth in this
Agreement, Acquiror makes no representation or warranty as to the present or
former condition or uses of the Acquiror Properties. Target expressly waives any
claim whatsoever, except for breach of representation or warranty contained
herein, relating to or arising from the physical condition of the Acquiror
Properties, including, without limitation, claims arising from the presence of
any Hazardous Materials on, at or beneath the Acquiror Properties or otherwise
arising under any Environmental Law, whether now or hereinafter in force.
Acquiror is not liable or bound in any manner by expressed or implied
warranties, guaranties or representations pertaining to the Acquiror Properties
or the Acquiror Leases made or furnished by any real estate broker, investment
banker, agent, attorney, employee, servant or other person representing or
purporting to represent Acquiror, unless the same are specifically set forth
herein.
ARTICLE V
COVENANTS
SECTION 5.01 Target Pre-Closing Obligations.
(a) Except as expressly contemplated by this Agreement or as set forth
in the Target Disclosure Letter, during the period from the date of this
Agreement and continuing until the earlier of the Effective Time or the
termination of this Agreement in accordance with its terms, Target will carry on
its business in its usual, regular and ordinary course, in substantially the
same manner as heretofore conducted, and use its reasonable efforts to preserve
intact its present business organizations and good will and keep available the
services of its present officers and employees.
(b) Except as expressly contemplated by this Agreement or as set forth
in the Target Disclosure Letter, during the period from the date of this
Agreement and continuing until the earlier of the Effective Time or the
termination of this Agreement in accordance with its terms, Target shall not,
unless Acquiror otherwise has consented in writing:
(i) (A) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any Target Common Stock or Target Preferred
Stock, except that Target shall be allowed to make dividend payments on
the Target Preferred Stock as are required pursuant to the terms of
Target's Certificate of Incorporation, as amended, (B) split, reverse
share split, stock dividend, combine or reclassify any of its capital
stock or Issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock, (C) redeem, purchase or otherwise acquire any of its
capital stock (except, with respect to the Target Preferred Stock, as
expressly required by the terms of the Target Preferred Stock plus up
to an aggregate of $270,000 of
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optional redemptions of the Target Preferred Stock) by or (D) amend the
terms of any of its securities, or propose to do any of the foregoing
except as expressly permitted hereby;
(ii) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any stock of any class or any other securities
(including, without limitation, indebtedness having the right to vote)
or equity equivalents (including, without limitation, stock
appreciation rights) or amend in any material respect any of the terms
of any such securities or Contracts outstanding on the date hereof
except as expressly permitted hereby;
(iii) amend or propose to amend its Certificate of
Incorporation or By-laws;
(iv) incur any, indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or warrants,
options or rights to acquire any debt securities of Target or guarantee
(or become liable for) any debt of others or make any loans, advances
or capital contributions to, or any investments in, any other person,
or make, create or grant any mortgage, pledge or otherwise Encumber any
assets or suffer any material Encumbrance thereupon, except for the
refinancing of indebtedness for borrowed money which becomes due and
payable between the date hereof through the Closing Date which shall be
in all respects reasonably acceptable to Acquiror;
(v) (A) prepay any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) or
(B) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise)
other than the payment, discharge or satisfaction, in the ordinary
course of operating the Target Properties in substantially the same
manner as heretofore conducted, or in accordance with their terms, of
claims, liabilities or obligations reflected or reserved against in, or
contemplated by, the Target Financial Statements;
(vi) change any of the accounting principles or practices used
by it in the preparation of any of Target's financial statements or
make any tax elections;
(vii) (A) increase any compensation or enter into or amend any
employment Contract with any of its present or future officers or
directors, or (B) adopt any new employee benefit plan (including,
without limitation, any stock option, stock benefit or stock purchase
plan) or amend any existing employee benefit plan in any material
respect;
(viii) acquire, enter into an option to acquire or exercise an
option or Contract to acquire additional real property, incur
additional indebtedness, encumber assets or
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commence construction of, or enter into any Contract to develop or
construct, or other real estate projects.
(ix) sell, lease in its entirety or otherwise dispose of (A)
any Target Properties or (B) except in the ordinary course of operating
the Target Properties, any of its other assets;
(x) enter into any Contract, borrowing, capital expenditure or
transaction which may result in total payments or liability by or to it
in excess of $10,000;
(xi) enter into any Affiliate Contract or any other Contract,
borrowing, capital expenditure or transaction with (i) any consultant
or employee, (ii) any person who is an officer, director or affiliate
of Target, any relative of any of the foregoing or any entity of which
any of the foregoing is an affiliate or (iii) to Target's knowledge,
any person who owns 5% or more of the outstanding Target Common Stock;
(xii) enter into any additional, or renew (except as may be
required pursuant to the terms of an existing Target Lease or other
agreement listed in the Target Disclosure Letter), amend or otherwise
modify any existing, Target Leases, except with Acquiror's prior
written consent which shall not be unreasonably withheld or delayed;
provided, that Acquiror shall be deemed to have granted such consent if
it fails to notify Target of its grant or withholding of such consent
within five business days after its receipt of a written request
therefor; or
(xiii) (A) agree to take any of the foregoing actions or (B)
take or agree to take any action that is reasonably likely to result in
any of Target's representations or warranties contained in this
Agreement, the Ancillary Documents, or in the certificates and other
documents delivered pursuant hereto or thereto being untrue, or result
in any of the conditions to the Merger set forth in Article VI not
being satisfied in any material respect.
(c) During the period from the date of this Agreement and continuing
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Target shall:
(i) confer on a regular basis with one or more representatives
of Acquiror to report on material operational matters and any proposals
to engage in material transactions;
(ii) promptly notify Acquiror of any material change in the
Target Properties, or in Target's condition (financial or otherwise),
business, properties, assets, liabilities or the normal course of
Target's business or in the operation of its properties, any material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the material breach
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of any of Target's representations or warranties contained in this
Agreement, the Ancillary Documents, or in the certificates and other
documents delivered pursuant hereto or thereto (other than a
representation or warranty qualified by reference to materiality or a
Target Material Adverse Effect), or the breach of any of Target's
representations or warranties contained in this Agreement, the
Ancillary Documents, or in the certificates and other documents
delivered pursuant hereto or thereto qualified by reference to
materiality or a Target Material Adverse Effect;
(iii) deliver to Acquiror draft copies in substantially final
form of any report, statement or schedule to be filed with the SEC
subsequent to the date of this Agreement at least two business days
prior to the filing thereof;
(iv) (A) make dividend payments on the Target Preferred Stock
required to be made pursuant to the terms of Target's Certificate of
Incorporation, as amended, (B) pay all accrued and unpaid dividends on
the Target Preferred Stock pursuant to the terms of the Target
Preferred Stock and (C) redeem such amount of Target Preferred Stock so
that the applicable rate of interest used to determine dividends
payable pursuant to the terms of the Target Preferred Stock shall be 8%
from the date hereof through and including the Closing Date;
(v) deliver to Acquiror within ten days after the end of each
month current Target Rent Rolls, together with a detailed aging report
of all receivables;
(vi) use reasonable efforts to obtain the Target Directors'
and Officers' Liability Insurance Policy; and
(vii) pay in full or otherwise satisfy and discharge all
obligations under the Target Affiliate Contracts that are due.
SECTION 5.02 Acquiror Pre-Closing Obligations.
(a) Except as expressly contemplated by this Agreement or as set forth
in the Acquiror Disclosure Letter, during the period from the date of this
Agreement and continuing until the earlier of the Effective Time or the
termination of this Agreement in accordance with its terms, Acquiror and the
Acquiror subsidiaries will each carry on their respective businesses (which
includes the acquisition and disposition of assets and properties) in its usual,
regular and ordinary course, in substantially the same manner as heretofore
conducted, and use their reasonable efforts to preserve intact their present
business organizations and goodwill and keep available the services of their
present officers and employees.
(b) Except as expressly contemplated by this Agreement or as set forth
in the Acquiror Disclosure Letter, during the period from the date of this
Agreement and continuing until the earlier of the Effective Time or the
termination of this Agreement in accordance with its terms, Acquiror shall not,
unless Target otherwise has consented in writing:
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(i) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights existing on the date
hereof and disclosed pursuant to this Agreement, effect any share
split, reverse share split, share dividend, recapitalization or other
similar transaction;
(ii) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of beneficial
interest, except for a dividend not to exceed $0.50 per share of
Acquiror Common Shares for each calendar quarter ending during the
period from the date hereof through the Closing Date, and dividends on
Acquiror Series A Preferred Shares or Acquiror Series A-1 Preferred
Shares in accordance with their terms;
(iii) issue any Acquiror Common Shares or Acquiror Common
Share Equivalents except: (A) such Acquiror Common Shares as are issued
upon conversion of any shares of beneficial interest that by their
terms are convertible into Acquiror Common Shares, and that (1) are
outstanding on the date hereof or (2) have been issued after the date
hereof and prior to the Closing Date to the extent not prohibited by
the terms of this Section 5.02(b)(iii); (B) such Acquiror Common Shares
as are issued pursuant to any dividend reinvestment plan or stock
purchase plan available to all holders of Acquiror Common Shares; (C)
such Acquiror Common Shares or Acquiror Common Share Equivalents as are
issued in any public offering for an amount per Acquiror Common Share
or Acquiror Common Share Equivalent (including any amount payable on
exercise of a Acquiror Common Share Equivalent) equal to at least 92%
or more of the closing price per share on the New York Stock Exchange,
Inc. ("NYSE") of the Acquiror Common Shares on the last trading day
immediately preceding the issue date, less any underwriting discounts
and commissions; (D) the issuance of preferred shares or any other
equity security of Acquiror (other than Acquiror Common Shares or
Acquiror Common Share Equivalents) in any public offering for fair
value; (E) such Acquiror Common Shares or Acquiror Common Share
Equivalents as are issued for fair market value in connection with the
acquisition of assets or properties from any person or entity that is
not affiliated with Acquiror prior to such acquisition; (F) Acquiror
Series A-1 Preferred Shares in connection with Acquiror's exchange of
issued and outstanding Acquiror Series A Preferred Shares for Acquiror
Series A-1 Preferred Shares; and (F) additional Acquiror Common Shares,
and additional Acquiror Common Share Equivalents, issued to Affiliates
of Acquiror provided that such additional Acquiror Common Shares and
the Acquiror Common Shares into which such Acquiror Common Share
Equivalents may be exercised or converted do not exceed, in the
aggregate, 250,000 Acquiror Common Shares, including, without
limitation, (1) Acquiror Common Shares issued to directors, officers,
employees, or trustees of Acquiror or any Acquiror Subsidiary and (2)
Acquiror Common Shares or Acquiror Common Share Equivalents issued
pursuant to stock option, stock purchase, performance or other
remuneration plans adopted by the Board of Trustees of Acquiror from
time to time (including, without limitation, Acquiror's 1992 Employee
Share Option Plan, 1992
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Trustee Share Option Plan and 1995 Management Incentive Plan, and any
Acquiror Common Shares issued to employees of Acquiror in lieu of
bonuses or to trustees of Acquiror in lieu of trustee's fees).
"Acquiror Common Share Equivalent" shall mean any evidence of
indebtedness, shares of beneficial interest or other securities which
are or may be convertible into or exchangeable for Acquiror Common
Shares ("Acquiror Convertible Securities"), or any warrant, option or
other right to subscribe for any Acquiror Convertible Securities or for
any Acquiror Common Shares; or
(iv) agree to take any of the foregoing actions or take or
agree to take any action that is reasonably likely to result in any of
Acquiror's representations or warranties contained in this Agreement,
the Ancillary Documents, or in the certificates and other documents
delivered pursuant hereto or thereto being untrue or result in any of
the conditions to the Merger set forth in Article VII not being
satisfied in any material respect.
(c) During the period from the date of this Agreement and continuing
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Acquiror shall:
(i) confer on a regular basis with one or more representatives
of Target to report on material transactions;
(ii) promptly notify Target of any material change in the
condition (financial or otherwise), business, properties, assets,
liabilities, prospects or the normal course of the Company's business
or in the operation of its properties, any material governmental
complaints, investigations or hearings (or communications indicating
that the same may be contemplated), or the material breach of any
representation or warranty (other than a representation or warranty
qualified by reference to materiality or an Acquiror Material Adverse
Effect), or the breach of any of Acquiror's or Newco's representations
or warranties contained in this Agreement, the Ancillary Documents, or
in the certificates and other documents delivered pursuant hereto or
thereto qualified by reference to materiality or an Acquiror Material
Adverse Effect; and
(iii) deliver to Target true and correct copies of any report,
statement or schedule filed with the SEC subsequent to the date of this
Agreement promptly after the filing thereof.
SECTION 5.03 Xxxx-Xxxxx-Xxxxxx and Other Filings. Subject to the terms
and conditions herein provided, Target and Acquiror shall: (i) to the extent
required, promptly make their respective filings and thereafter make any other
required submissions under the HSR Act with respect to the Merger; (ii) use all
reasonable efforts to cooperate with one another in (x) determining which
filings are required to be made prior to the Effective Time with, and which
consents, approvals, permits or authorizations are required to be obtained
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prior to the Effective Time from, governmental or regulatory authorities of the
United States, the several states and local and foreign jurisdictions in
connection with the execution, delivery and performance of this Agreement and
the consummation of the Merger and the other transactions contemplated hereby
and thereby and (y) timely making all such filings and timely seeking all such
consents, approvals, permits or authorizations; (iii) use all reasonable efforts
to obtain in writing any consents required from third parties in form and
substance reasonably satisfactory to Target and Acquiror necessary to consummate
the Merger and the other transactions contemplated hereby and thereby; and (iv)
use all reasonable efforts to take, or cause to be taken, all other action and
do, or cause to be done, all other things necessary, proper or appropriate to
consummate the Merger and the other transactions contemplated by this Agreement
and the Ancillary Documents. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purpose of this
Agreement, the proper officers and directors of Target and Acquiror shall take
all such necessary action.
SECTION 5.04 Title Insurance. Target shall cause a person or entity
acceptable to the Title Company (as defined below) that shall own of record upon
consummation of the Merger Acquiror Series B Preferred Shares having a
liquidation preference of at least $1,000,000, to deliver such affidavits,
indemnities and/or financial statements as shall have been agreed upon between
Target and the title company or companies chosen by Acquiror (collectively, the
"Title Company") prior to the date hereof so as to enable the Title Company to
issue the title insurance policies required by Section 6.20.
SECTION 5.05 No Solicitations. Target will immediately cease any
existing discussions or negotiations with any third parties conducted prior to
the date hereof with respect to any merger, business combination, sale of any
Target Properties, or, except as permitted by Section 5.01(b)(ix), sale of any
other assets of Target, sale of shares of capital stock by Target or similar
transaction involving such party or any of its subsidiaries or divisions (a
"Target Acquisition Transaction"). Neither Target, nor its directors, officers,
partners, employees, bankers, attorneys or other advisors or representatives
shall, directly or indirectly, solicit, initiate or encourage any person or
entity concerning any Target Acquisition Transaction (other than the
transactions contemplated by this Agreement and the Ancillary Agreements);
provided, however, that (i) nothing in this Agreement shall preclude Target's
Board of Directors, pursuant to its fiduciary duties as determined by Target's
Board of Directors after consultation with Rosenman & Colin LLP or another
nationally-recognized law firm, from entering into, or causing Target's
officers, representatives, agents or affiliates from entering into, negotiations
with or furnishing information to a third party which has initiated contact with
Target without any solicitation, initiation or encouragement in violation of
this Section, from passing on to Target Stockholders information regarding any
such third party proposal or inquiry consistent with such fiduciary duties, or
otherwise fulfilling such fiduciary duties, and (ii) Target may participate in
negotiations with or furnish information to a third party which (without any
solicitation, initiation or encouragement from Target) has initiated contact
with Target with respect to a Target Acquisition Transaction consistent with the
fiduciary obligations of its Board of Directors. Target shall promptly advise
Acquiror of the receipt of any written offer for an Target Acquisition
Transaction, including, without
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limitation, the terms thereof, and, in the event Target receives such a written
offer, nothing contained in this Agreement shall prevent Target's Board of
Directors from approving such proposal or recommending such Target Acquisition
Transaction to Target's Stockholders if Target's Board of Directors determines
in good faith that failure to take such action would not be consistent with, or
would result in a breach of, its fiduciary duties as determined by Target's
Board of Directors after consultation with Rosenman & Colin LLP or another
nationally-recognized law firm, and in such case the Board of Directors of
Target may amend, withhold or withdraw its recommendation regarding the Merger.
In the event that Target is prepared to accept another proposal for a Target
Acquisition Transaction, Target shall notify Acquiror at least 48 hours prior to
terminating this Agreement and entering into a definitive agreement with respect
to such other proposal, unless Target receives an opinion of counsel that
compliance with its obligation to give 48 hours' notice as required pursuant to
this Agreement would not be consistent with, or would constitute a breach of,
the fiduciary duties of Target's Board of Directors. Nothing in this Agreement
shall prevent Target or its Board of Directors from complying with the
provisions of the 1934 Act and the rules and regulations thereunder.
SECTION 5.06 Access to Information.
(a) Upon reasonable notice and subject to restrictions contained in
confidentiality Contracts listed in the Target Disclosure Letter to which it is
subject (from which it shall use reasonable efforts to be released), Target
shall afford to the officers, employees, accountants, counsel and other
representatives of Acquiror ("Acquiror Representatives"), reasonable access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, Contracts and records and, during such period, Target
shall furnish promptly to Acquiror all information concerning Target, its
business, properties and personnel as Acquiror may reasonably request. Acquiror
Representatives shall be permitted to make copies of and extracts from, the
accounts, minute books, other records, books of account, other books, deeds,
leases, title documents, insurance policies, Contracts, tax returns, records and
files of Target, and such other information relating to Target, and its
business, properties and personnel as Acquiror shall reasonably request.
(b) Upon reasonable notice and subject to restrictions contained in
confidentiality Contracts to which it is subject (from which it shall use
reasonable efforts to be released), Acquiror shall (and shall cause each of the
Acquiror Subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives of Target ("Target Representatives"),
reasonable access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, Contracts, and records and, during
such period, Acquiror shall (and shall cause each of the Acquiror Subsidiaries
to) furnish promptly to Target all information concerning its business,
properties and personnel as Target may reasonably request. Target
Representatives shall be permitted to make copies of and extracts from, the
accounts, minute books, other records, books of account, other books, deeds,
leases, title documents, insurance policies, Contracts, tax returns, records and
files of Acquiror, and
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such other information relating to Acquiror, and its business, properties and
personnel as Target shall reasonably request.
SECTION 5.07 Target Stockholder Meeting. Target will take all action
necessary in accordance with Delaware law, Target's Certificate of
Incorporation, as amended, and its By-laws, to convene a special meeting of the
Target Stockholders (the "Target Stockholders Meeting") as promptly as
practicable following effectiveness of the registration statement on Form S-4
(the "S-4"), or other appropriate registration statement, of Acquiror and the
clearance by the SEC of the proxy statement (which will be included in the S-4
or other registration statement) relating to the Target Stockholders Meeting
(the "Target Proxy Statement") to consider and vote upon the approval of this
Agreement, the Merger and the transactions contemplated by this Agreement and
the Ancillary Documents. Target's Board of Directors shall, subject to its good
faith judgment as to its fiduciary obligations to Target's stockholders imposed
by law, recommend that the Target Stockholders vote in favor of this Agreement,
the Merger and the transactions hereby contemplated and cause Target to take all
lawful actions to solicit from the Target Stockholders proxies in favor of such
approval.
SECTION 5.08 Target Proxy Statement.
(a) Target shall prepare (and Acquiror shall assist where reasonable
and appropriate), as promptly as practicable upon execution of this Agreement,
the Target Proxy Statement and a form of proxy for use at the Target
Stockholders Meeting relating to the vote of the Target Stockholders with
respect to this Agreement, the Merger and the transactions hereby contemplated
(together with any amendments or supplements thereto, in each case in the form
or forms mailed to the Target Stockholders). Target shall cause the Target Proxy
Statement to be mailed to Target Stockholders at the earliest possible date.
Acquiror and Newco shall promptly furnish to Target such information regarding
each of Acquiror and Newco and their respective officers and directors as may be
reasonably requested by Target for inclusion in the Target Proxy Statement as
required by any law or by the SEC.
(b) Target covenants that none of the information concerning Target or
any of its affiliates, directors, officers, employees, agents or representatives
in the Target Proxy Statement (including, without limitation, such information
contained in the Target Proxy Statement as is based on Target's representations
and warranties herein) will, at the time the Registration Statement or any
amendment or supplement thereto is filed with the SEC or becomes effective and
at the time of mailing of the Target Proxy Statement or any amendment or
supplement thereto to the Target Stockholders, not contain any untrue statement
of any material fact, or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Target covenants that the Target Proxy Statement shall
comply in all material respects with the applicable provisions of the 1934 Act
and the rules and regulations thereunder, except that no covenant is made by
Target with respect to statements made therein based on information supplied by
Acquiror or Newco or any of their affiliates, directors, officers, employees,
agents or representatives in writing for inclusion or
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incorporation by reference therein or based upon Acquiror's or Newco's
representations or warranties made herein or in any Ancillary Documents or with
respect to omitted information regarding Acquiror or Newco so required to be
included in the Target Proxy Statement.
(c) Acquiror covenants that none of the information supplied or to be
supplied in writing by Acquiror or Newco or any of its affiliates, directors,
officers, employees, agents or representatives for inclusion or incorporation by
reference in the Target Proxy Statement (including, without limitation, such
information contained in the Target Proxy Statement as is based on Acquiror's
and Newco's representations and warranties herein) will, at the time the
Registration Statement or any amendment or supplement thereto is filed with the
SEC or becomes effective and at the time of mailing of the Target Proxy
Statement or any amendment or supplement thereto to the Target Stockholders, not
contain any untrue statement of any material fact, or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 5.09 Registration Statement.
(a) Acquiror shall register under the 1933 Act the Acquiror Series B
Preferred Shares to be issued in the Merger and the Acquiror Common Shares to be
issued upon the conversion of shares of Acquiror Series B Preferred Shares on a
registration statement on Form S-4 or another appropriate registration statement
(the "Acquiror Registration Statement") (which shall contain the Target Proxy
Statement) and shall keep such registration effective thereafter through the
third anniversary of the Closing Date. As promptly as practicable after the date
of this Agreement, Acquiror shall prepare, with the assistance of Target, as
appropriate, and file with the SEC the Acquiror Registration Statement together
with the prospectus to be included therein (the "Prospectus") and the Target
Proxy Statement included therein, and any other documents required by the 1933
Act or the 1934 Act in connection with the Merger. Each of Acquiror and Target
shall use reasonable efforts to respond promptly to any comments of the SEC and
to have the Acquiror Registration Statement declared effective under the 1933
Act as promptly as practicable after such filing. Acquiror shall use its
reasonable efforts to obtain, prior to the Effective Time, all necessary state
securities or "blue sky" permits or approvals required to consummate the Merger
and the other transactions contemplated by this Agreement and the Ancillary
Documents.
Target shall promptly furnish to Acquiror all information
concerning Target and the Target Stockholders as may be reasonably required in
connection with any action contemplated by this Section 5.09. Each of Acquiror
and Target will notify the other promptly of the receipt of any comments from
the SEC or its staff and of any request by the SEC or its staff for amendments
or supplements to the Acquiror Registration Statement or the Prospectus or for
additional information and will supply the other with copies of all
correspondence with the SEC or its staff with respect to the Acquiror
Registration Statement or the Prospectus. Whenever any event occurs which should
be set forth in an amendment or supplement to the Acquiror Registration
Statement or the Prospectus, Acquiror or Target, as the case may be,
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shall promptly inform the other of such occurrence and cooperate in filing with
the SEC or its staff, and/or mailing to stockholders of Target, such amendment
or supplement.
(b) Acquiror covenants that none of the information in the Acquiror
Registration Statement will, at the time the Acquiror Registration Statement is
filed with the SEC and at the time it becomes effective under the 1933 Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading, except
that no covenant is made by Acquiror with respect to statements made therein
based on information supplied in writing by Target for inclusion in the Acquiror
Registration Statement. Acquiror covenants that the Acquiror Registration
Statement and the Prospectus will comply in all material respects with the
provisions of the 1933 Act and the 1934 Act, as the case may be, and the rules
and regulations thereunder, except that no covenant is made by Acquiror with
respect to statements made therein based on information supplied by Target or
any of its affiliates, directors, officers, employees, agents or representatives
in writing for inclusion or incorporation by reference therein or based upon
Target's representations or warranties made herein or in any Ancillary Documents
or with respect to omitted information regarding Target so required to be
included in the Registration Statement.
(c) Target covenants that none of the information supplied in writing
by Target for inclusion or incorporation by reference in the Acquiror
Registration Statement or any amendments or supplements thereto to be filed with
the SEC in connection with the issuance of Acquiror Series B Preferred Shares
and, upon conversion, Acquiror Common Shares, pursuant to the transactions
hereby contemplated will, at the time the Acquiror Registration Statement or any
amendments or supplements thereto is filed with the SEC and at the time it
becomes effective under the 1933 Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstance under
which they were made, not misleading.
SECTION 5.10 Efforts to Consummate. Subject to the terms and conditions
of this Agreement, in addition to the matters otherwise specifically set forth
in this Article V, each of the parties hereto agrees to use reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
including, without limitation, (i) the preparation and filing of all other
forms, registrations and notices required to be filed to consummate the Merger
and the transactions hereby contemplated and the taking of such actions as are
necessary to obtain any requisite approvals, consents, orders, exemptions, or
waivers (including, without limitation, any Target Consents) by any public or
private third party, (ii) such actions as may be required to permit, on or prior
to the Effective Time, the Acquiror Series B Preferred Shares to be issued
pursuant to the terms and conditions hereof and the Acquiror Common Shares to be
issued upon conversion to be listed on the NYSE (subject to official notice of
issuance), and (iii) such actions as may be reasonable to cause, concurrently
with the Effective Time, the delisting of Target's securities from the OTC
Bulletin Board and the deregistration of Target's
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securities under the 1934 Act; provided, however, that in order to obtain any
consent, approval, waiver, license, permit, authorization, registration,
qualification or other permission or action referred to in clause (i) of this
sentence, no party shall be required to (A) pay any consideration, to divest
itself of any of, or otherwise rearrange the composition of, its assets or to
agree to any conditions or requirements which are materially adverse or
burdensome or (B) amend, or agree to amend, in any material respect any
Contract. Each party shall promptly consult with the other and provide any
necessary information with respect to, and provide the other (or its counsel)
with copies of, all filings made by such party with any Governmental Entity in
connection with this Agreement, the Merger and the transactions hereby
contemplated.
SECTION 5.11 Letters of Accountants. Each of Target and Acquiror shall
use reasonable efforts to cause to be delivered to the other, letters from their
respective independent public accountants to each such party, dated a date no
later than the date on which the Acquiror Registration Statement and any
supplements or post-effective amendments thereto shall become effective and
addressed to the other, in form and substance reasonably satisfactory to the
other and customary in scope and substance for "cold comfort" letters delivered
by independent public accountants in connection with registration statements
similar to the Acquiror Registration Statement.
SECTION 5.12 Indemnification of Managers.
(a) Acquiror and Newco each agree that all rights, if any, to
indemnification existing on the date hereof in favor of the present or former
officers and directors of Target (the "Managers"), with respect to actions taken
in their capacity as officers and/or directors prior to or at the Effective Time
as provided in Target's Certificate of Incorporation and By-laws (including,
without limitation, in connection with the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents), shall, subject to
Delaware law, survive the Merger for a period of seven years. The Surviving
Corporation and Acquiror shall assume, honor and be bound by the terms of such
Certificate of Incorporation and By-laws with respect to their actions and
omissions in such capacity taken prior to the Effective Time (including, without
limitation, in connection with the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents), whether or not such
persons continue in their positions with the Surviving Corporation following the
Effective Time, and shall continue in full force and effect following the
Effective Time for a period of seven years, and all such rights, if any, in the
Certificate of Incorporation and By-laws in effect as of the date hereof between
Target and any Manager shall survive the Merger and continue in full force and
effect in accordance with its terms as between such Managers and the Surviving
Corporation and Acquiror for a period of seven years.
(b) Target shall use reasonable efforts to obtain a tail covering the
period from the Closing Date through the first anniversary of the Closing Date
to, and having substantially the same coverage and deductibles as, the Existing
Target D & O Liability Insurance Policy (the "Target D & O Insurance Liability
Tail"). The premium for such Target D & O Liability
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Insurance Tail shall not exceed $75,000 and shall be a Merger Expense. In the
event that Target is unable to obtain the Target Directors' and Officers'
Liability Insurance Policy for such period, Acquiror agrees to indemnify, until
the first anniversary of the Closing Date, the directors and officers covered by
the Existing Target D & O Liability Insurance Policy on the same or similar
terms and conditions in effect under the Existing Target D & O Liability
Insurance Policy, and the same dollar limitations in effect under Acquiror's
directors' and officers' liability insurance policy, as currently in effect.
Acquiror has delivered or made available to Target a true, correct and complete
copy of Acquiror's directors' and officers' liability insurance policy, as
currently in effect.
(c) The provisions of this Section 5.12 shall survive the Effective
Time and are intended to be for the benefit of, and shall be enforceable by,
each officer and director of Target and his or her heirs and representatives.
SECTION 5.13 No Breach of Representations and Warranties. Each of
Target, Acquiror and Newco agree that it will not take any action that would
cause or constitute, or would, if it had been taken prior to the date hereof,
have caused or constituted, a material breach of any of its respective
representations or warranties (other than those representations or warranties
qualified by reference to materiality or an Acquiror Material Adverse Effect or
a Target Material Adverse Effect, as the case may be), or the breach of any of
its respective representations or warranties qualified by reference to
materiality or an Acquiror Material Adverse Effect or a Target Material Adverse
Effect, as the case may be, contained in this Agreement, the Ancillary
Documents, or in the certificates and other documents delivered pursuant hereto
or thereto. Each of the parties hereto shall, in the event of, or promptly after
the occurrence of, or promptly after obtaining knowledge of the occurrence of or
the impending or threatened occurrence of, any fact or event which would cause
or constitute a Target Material Adverse Effect, with respect to Target, or a
Acquiror Material Adverse Effect, with respect to Acquiror or Newco, or a
material breach of any of the representations or warranties (other than those
representations or warranties qualified by reference to materiality or an
Acquiror Material Adverse Effect or a Target Material Adverse Effect, as the
case may be), or the breach of any of the representations or warranties
qualified by reference to materiality or an Acquiror Material Adverse Effect or
a Target Material Adverse Effect, as the case may be, contained in this
Agreement, the Ancillary Documents, or in the certificates and other documents
delivered pursuant hereto or thereto, as of the Closing Date, give detailed
notice thereof to the other parties hereto; and such notifying party shall use
its or their reasonable efforts to prevent or promptly to remedy such breach.
The giving of notice pursuant to this Section 5.13 shall not act as a waiver of
any breach hereunder.
SECTION 5.14 Consents; Notices.
(a) Target shall use reasonable efforts to make, and Acquiror shall use
all reasonable efforts to cooperate with Target in Target's making, the filings
and registrations with, and obtain the consents, authorizations, declarations
and approvals of, the Governmental Entities and other third parties, necessary
for the execution, delivery and performance by
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Target of this Agreement or any of the Ancillary Documents or the consummation
of the Merger and the other transactions contemplated by this Agreement and the
Ancillary Documents. Target shall also deliver all notices to third parties
required to be delivered in connection with the execution of this Agreement and
the consummation of the Merger and the transactions hereby contemplated.
(b) Acquiror shall use reasonable efforts to obtain and deliver to
Target written consents identified in the Acquiror Disclosure Letter, in form
and substance reasonably satisfactory to Target required in connection with this
Agreement, the Merger or the transactions hereby contemplated. Target shall use
all reasonable efforts to cooperate with Acquiror in Acquiror's obtaining of
such consents. Acquiror shall also deliver all notices to third parties required
to be delivered in connection with the execution of this Agreement and the
consummation of the Merger and the transactions hereby contemplated.
SECTION 5.15 Public Announcements. Except as otherwise required by law
or the rules of the NASD or the NYSE, neither Target nor Acquiror shall, nor
shall Acquiror permit any of the Acquiror Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to
the Merger and the transactions contemplated by this Agreement and the Ancillary
Documents without prior written approval of the other party, which approval
shall not be unreasonably withheld.
SECTION 5.16 Exchange Listing. Acquiror shall promptly prepare and
submit to the NYSE a listing application covering the Acquiror Common Shares
issuable upon conversion of the Acquiror Series B Preferred Shares, and shall
use reasonable efforts to obtain, prior to the Effective Time, approval for the
listing of such Acquiror Common Shares, subject to official notice of issuance;
and Acquiror shall pay the listing fee in connection therewith. Prior to the
Effective Time, Acquiror shall, if and when notified in writing by Target, use
reasonable efforts to cause the Acquiror Series B Preferred Shares to be listed
on the NYSE and Target shall pay the listing fee in connection therewith. If
Target does not request listing of the Series B Preferred Shares as aforesaid
prior to the Effective Time, then after the Effective Time, Acquiror shall, if
and when notified in writing by holders of a majority of the Acquiror Series B
Preferred Shares, use reasonable efforts to cause the Acquiror Series B
Preferred Shares to be listed on the NYSE and holders of the Acquiror Series B
Preferred Shares shall pay the listing fee in connection therewith.
SECTION 5.17 Filing of Articles Supplementary.
(a) Acquiror shall, on or prior to the Closing Date, file with the
State Department of Assessments and Taxation of Maryland the Articles
Supplementary for the Acquiror Series B Preferred Shares (the "Acquiror Series B
Preferred Shares Articles Supplementary") and the Articles Supplementary for the
Acquiror Series C Preferred Shares and shall promptly deliver to Target evidence
of such filings.
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(b) When issued, the Acquiror Series B Preferred Shares, Acquiror
Series C Preferred Shares and the Acquiror Common Shares to be issued upon
conversion of the Acquiror Series B Preferred Shares shall be duly authorized,
validly issued, fully paid and nonassessable except that shareholders may be
subject to further assessment with respect to claims for tort, contract, taxes,
statutory liability and otherwise in some jurisdictions to the extent such
claims are not satisfied by Acquiror. The Acquiror Series B Preferred Shares and
the Acquiror Series C Preferred Shares shall be as set forth in the Articles
Supplementary attached as Exhibit A hereto and Exhibit B hereto, respectively,
with the completion of any blanks contained therein.
SECTION 5.18 Closing Certificates. Target shall prepare and deliver to
Acquiror at the Closing the Closing Adjustment Statement and a certificate
setting forth all of the Merger Expenses.
SECTION 5.19 Reorganization. The parties intend to adopt this Agreement
and the Merger as a plan of reorganization under Section 368(a)(1)(A) of the
Code. Each of Acquiror, Newco and Target agree to use reasonable efforts not to
(i) knowingly take or fail to take any actions that would jeopardize
qualification of the Merger as a reorganization pursuant to the provisions of
Section 368(a)(1)(A) of the Code, (ii) enter into any Contract with respect to
the foregoing, or (iii) take a position inconsistent with this Section on any
tax return or otherwise unless otherwise required by law.
SECTION 5.20 No Improvements; Damage or Destruction; Condemnation;
Environmental.
(a) Acquiror specifically agrees that Target shall not be obligated to
do any restoration, repairs or other work in connection with the Target
Properties, and that Target shall not be responsible for any work or
improvements, including, without limitation, any clean-up or other environmental
remedial or removal work, necessary to cause the Target Properties to meet
applicable Environmental Laws or other laws, ordinances, regulations, or be
suitable for any particular use.
(b) Notwithstanding anything else in this Agreement, in the event of
the destruction of or damage to any of the Target Properties by fire or other
casualty, or any taking thereof by condemnation or eminent domain, prior to the
Closing resulting in Target Costs (without giving effect to insurance proceeds)
in excess of $5,000,000, Acquiror shall have the right, in its sole discretion,
either to (i) terminate this Agreement or (ii) proceed to closing hereunder
without any abatement of the Merger consideration, it being agreed that
Acquiror's sole remedy would be to succeed to Target's claims, rights and
proceeds, whether from insurance or otherwise, by reason of the Merger.
SECTION 5.21 Affiliates of Target.
(a) At least 30 days prior to the Closing Date, Target shall deliver to
Acquiror a list of names and addresses of those persons who were, in Target's
reasonable judgment, on
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the record date for the Target Stockholders Meeting, Affiliates of Target.
Target shall provide Acquiror with such information and documents as Acquiror
shall reasonably request for purposes of reviewing such list. Target shall use
all reasonable efforts to deliver to Acquiror, prior to the Closing Date, from
each of the Affiliates identified in the foregoing list, an Affiliate Letter in
the form attached hereto as Exhibit C hereto (each, an "Affiliate Letter").
Acquiror shall be entitled to place legends as specified in such Affiliate
Letters on the certificates evidencing any Acquiror Common Shares, Acquiror
Series B Preferred Shares and Acquiror Series C Preferred Shares to be received
by such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Acquiror
Common Shares, Acquiror Series B Preferred Shares and Acquiror Series C
Preferred Shares consistent with the terms of such Affiliate Letters.
(b) Acquiror shall file the reports required to be filed by it under
the 1934 Act and the rules and regulations promulgated thereunder, and it will
take such further action as any Affiliate may reasonably request, all to the
extent required from time to time to enable such Affiliate to sell Acquiror
Common Shares, Acquiror Series B Preferred Shares and Acquiror Series C
Preferred Shares received by such Affiliate in the Merger without registration
under the 1933 Act pursuant to (i) Rule 145, or (ii) any successor rule or
regulation hereafter adopted by the SEC.
SECTION 5.22 Estoppel Certificates. Target shall request an estoppel
certificate (an "Estoppel Certificate") from (i) each of the tenants of the
Target Properties in the form attached to or required by the applicable Target
Lease, or in the form commonly used by such tenant, or, if no form is attached
to or required by the applicable Target Lease, or commonly used by the
applicable tenant, then in the form of Exhibit D, (ii) each party to a Target
REA Agreement, in the form of Exhibit D and (iii) each mortgagee to each
mortgage encumbering any of the Target Properties, in the form of Exhibit D.
Target shall deliver to Acquiror true, correct and complete copies of all
Estoppel Certificates received by Target and shall notify Acquiror of any such
tenants, parties or mortgagees that refuse to deliver an Estoppel Certificate
and the reason for such refusal, if known.
SECTION 5.23 Indemnification Obligations.
(a) Target shall indemnify and hold harmless Acquiror and Newco, and
their affiliates, directors, trustees, shareholders, representatives, employees
and agents, from and against, and in respect of, any and all damages, claims,
losses, charges, actions, suits, proceedings, costs and expenses (including,
without limitation, attorneys' fees and expenses) up to an aggregate of $50,000
which are incurred or suffered by any or all of them by reason of, with respect
to, or arising from, the action entitled Xxxx Xxxxxxx vs. Xxxxxxx X. Xxxxxx,
Xxxxxx X. Xxxxxx, Xxxx XxXxxx, Xxxxxx Xxxxxxxx, Xxxxxxx XxXxxxx and Xxxxxxxx X.
Xxxxxxxx, Milestone Properties, Inc. and Concord Assets Group, Inc. pending in
the Court of Chancery of the State of Delaware in and for New Castle County,
C.A. No. 14807 (the "Pending Milestone Action") or any other action or
proceeding with respect to, or arising out of, the facts, events and
circumstances giving rise to the Pending Milestone Action.
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(b) After the Effective Time and to the extent Acquiror assumes any
indebtedness or other obligations as to which Milestone is liable pursuant to
any Milestone Obligation, Acquiror shall indemnify and hold harmless Milestone,
and its affiliates, directors, shareholders, representatives, employees and
agents, from and against, and in respect of, any and all damages, claims,
losses, charges, actions, suits, proceedings, cost and expenses (including,
without limitation, attorneys' fees and expenses) which are incurred or suffered
by Milestone by reason of, with respect to, or arising from, the failure of
Acquiror to pay or perform any such indebtedness or other obligations in
accordance with their terms. The parties hereby agree that Milestone shall be a
third party beneficiary of this Section 5.23(b), and that this Section 5.23(c)
shall not be amended without the written agreement of Milestone.
SECTION 5.24 First Union Line of Credit. The aggregate amount of all
obligations of Target under the line of credit (the "First Union Line of
Credit") extended by First Union National Bank ("First Union") to Target
pursuant to the loan agreement dated April 24, 1995, between First Union and
Target (including, without limitation, obligations to pay the principal amount
of all loans made under the First Union Line of Credit and all interest thereon)
and the amount of all debt assumption, prepayment and other fees, shall not
exceed $2,000,000 at the Effective Time. At or prior to the Effective Time,
Acquiror shall transfer to another branch of First Union, pay or refinance, the
First Union Line of Credit, provided that the amount of all debt assumption,
prepayment and other fees do not exceed $2,000,000 at the Effective Time.
SECTION 5.25 Sale of South Carolina Outparcel. Notwithstanding anything
contained in this Agreement to the contrary, Target may transfer (the "South
Carolina Outparcel Transfer") to the South Carolina Outparcel Purchaser the
South Carolina Outparcel, in accordance with the terms of the South Carolina
Outparcel Agreement, in settlement of any dispute or litigation arising out of
or relating to the South Carolina Outparcel Agreement; provided, that (i) Target
obtains from the South Carolina Outparcel Purchaser a release, in form and
substance reasonably satisfactory to Acquiror, of all claims the South Carolina
Outparcel Purchaser may have arising out of or relating to the South Carolina
Outparcel Agreement, (ii) all of the South Carolina Outparcel Proceeds are cash
and (iii) Target deposits all of the South Carolina Outparcel Proceeds into a
segregated account. Target shall not expend, distribute, Encumber or commingle
the South Carolina Outparcel Proceeds with any other funds of Target or any
other person except payments pursuant to clauses (2) or (3) below. "South
Carolina Outparcel Proceeds" shall mean the gross proceeds of the transfer of
the South Carolina Outparcel, less (1) any out-of-pocket costs and expenses
(including reasonable attorneys' fees and customary and reasonable brokerage
commissions) incurred by Target to unrelated third parties in order to
consummate the transfer of the South Carolina Outparcel, (2) any costs required
pursuant to paragraphs 2 and 3 of that certain Lease Modification Agreement by
and between Xxxxxx Xxxxxx, Inc., as tenant, and Target, as landlord (a true,
correct and complete of which has been delivered to Acquiror) and (3) payment of
up to $19,000 of income tax to any federal, state or local taxing authority that
is attributable to
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gain recognized from the South Carolina Outparcel Transfer; provided, however,
the amounts paid by Target pursuant to clauses (1) and (2) of this Section 5.25
shall not exceed $60,000.
SECTION 5.26 Termination of Management Agreements. On or prior to the
Closing Date, Target shall terminate, without any cost, expense or liability to
Target, the Company or Newco, any and all management agreements relating to any
or all of the Target Properties, including, without limitation, those management
agreements listed in the Target Disclosure Letter.
ARTICLE VI
CONDITIONS TO ACQUIROR'S AND NEWCO'S OBLIGATIONS
All obligations of Acquiror and Newco under this Agreement are subject
to the fulfillment, at the Closing Date, of each of the following conditions,
any or all of which may be waived in whole or in part, at or prior to the
Closing Date, by Acquiror in its sole discretion:
SECTION 6.01 Representations and Warranties. (i) All representations
and warranties of Target contained in this Agreement, the Ancillary Documents,
or in the certificates and other documents delivered pursuant hereto or thereto
(other than representations or warranties qualified by reference to materiality
or a Target Material Adverse Effect), shall be true and correct in all material
respects, and (ii) all representations and warranties contained in this
Agreement, the Ancillary Documents, or in the certificates and other documents
delivered pursuant hereto or thereto qualified by reference to materiality or a
Target Material Adverse Effect shall be true and correct, in the case of each of
clause (i) and (ii), at and as of the Closing Date as though such
representations and warranties were made at and as of such time, except for
those representations and warranties that are expressly made as of a specified
earlier date. For the purposes of Section 6.01(i), the representations and
warranties of Target shall be deemed true and correct in all material respects
unless the breach of such representations and warranties, in the aggregate,
could reasonably be expected to have a Target Material Adverse Effect.
SECTION 6.02 Covenants. Target shall have performed and complied in all
material respects with all agreements and conditions on its part required by
this Agreement to be performed or complied with prior to or on the Closing Date.
SECTION 6.03 Officer's Certificate. Acquiror shall have received a
certificate of an executive officer of Target, dated the Closing Date,
certifying to the fulfillment of the conditions specified in Section 6.01 and
Section 6.02.
SECTION 6.04 Opinion of Counsel. Target shall have received an opinion
of counsel of Rosenman & Colin LLP, counsel for Target, dated the Closing Date,
in form and substance reasonably satisfactory to Acquiror, that, among other
things, shall be to the effect
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that the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code, and that
Target and Acquiror will each be a party to that reorganization within the
meaning of Section 368(b) of the Code.
SECTION 6.05 Absence of Changes. From the date of this Agreement
through the Effective Time, there shall not have occurred any change or changes
in the financial condition, business or operations of Target that could
reasonably be expected to have a Target Material Adverse Effect.
SECTION 6.06 Number of Dissenting Shares. If holders of shares of
Target Common Stock who did not vote in favor of this Agreement and the Merger
are entitled to demand appraisal rights in accordance with the DGCL, the number
of Dissenting Shares shall not at any time exceed 7.5% of the shares of Target
Common Stock outstanding at such time.
SECTION 6.07 Approvals and Consents. Acquiror shall have received (in
form and substance reasonably satisfactory to Acquiror) all filings,
registrations, consents, authorizations, declarations or approvals necessary to
consummate the Merger and the other transactions contemplated by this Agreement
and the Ancillary Documents, other than such filings, registrations, consents,
authorizations, declarations or approvals, the absence of which, individually or
in the aggregate, could not reasonably be expected to have an Acquiror Material
Adverse Effect if the transactions contemplated by this Agreement and the
Ancillary Documents were consummated without first obtaining such filings,
registrations, consents, authorizations, declarations or approvals. Acquiror
shall have obtained the approval for the listing of the Acquiror Common Shares
issuable in the Merger on the NYSE, subject to official notice of issuance.
SECTION 6.08 Injunctions. No court, agency or other authority shall
have issued any order, decree or judgment to set aside, restrain, enjoin or
prevent, and no statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any United States
court or Governmental Entity of competent jurisdiction which prohibits
restrains, enjoins, sets aside or prevents, the consummation of the Merger or
the transactions hereby contemplated.
SECTION 6.09 HSR Act. If applicable, Target shall have made all
pre-merger notification filings required to be made by it under the HSR Act, all
applicable waiting periods thereunder shall have expired or been terminated
without any request from any appropriate governmental agency for additional
information or, if additional information has been requested, all applicable
extended waiting periods shall have expired.
SECTION 6.10 Effectiveness of Registration Statement. The Acquiror
Registration Statement shall have been declared effective under the 1933 Act,
all necessary state securities or "blue sky" permits or approvals required to
consummate the Merger and the other transactions contemplated by this Agreement
and the Ancillary Documents shall have been
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obtained, and no stop order or proceedings seeking a stop order with respect to
any of the foregoing shall be in effect.
SECTION 6.11 Stockholder Approval. This Agreement and the Merger and
the other transactions contemplated by this Agreement and the Ancillary
Documents shall have been approved in the manner required by applicable law, and
by applicable regulations of any stock exchange or other regulatory body, by the
holders of the issued and outstanding shares of capital stock or beneficial
interest of Target entitled to vote thereon on or before March 31, 1997.
SECTION 6.12 Accountants' Letters. Acquiror shall have received "cold
comfort" letters from Deloitte & Touche LLP, Target's independent public
accountants, dated no later than the date of the effectiveness of the Acquiror
Registration Statement and any supplements and post-effective amendments
thereto, with respect to the operations of Target in the form and substance of
such letters delivered by independent public accountants in connection with the
Acquiror Registration Statement and reasonably satisfactory to Acquiror and its
counsel.
SECTION 6.13 Shareholders and Voting Trust Agreement. The Affiliates of
Target listed in the Target Disclosure Letter (other than Xxxxxx Xxxx, Xxxx
XxXxxx and Xxxxxx Xxxxx) shall have executed and delivered a shareholders and
voting trust agreement with Acquiror, dated as of the Closing Date,
substantially in the form attached as Exhibit E hereto (the "Shareholders
Agreement"), which shall set forth certain terms, conditions and limitations
with respect to the shares of Acquiror Series B Preferred Shares to be received
by said parties pursuant to the Merger. The Shareholders Agreement, when
executed, shall be the legal, valid and binding obligation of the signatories
thereto, shall be enforceable in accordance with its terms (except as may be
limited by bankruptcy and other laws affecting the enforceability of creditors'
rights generally or laws governing the availability of specific performance or
other equitable remedies, or restrictions of the enforcement of securities
indemnification and contribution provisions imposed by public policy) and shall
not conflict with any other agreement to which any of the signatories thereto is
a party.
SECTION 6.14 Guaranty Agreement. A person or entity designated by
Target that shall own of record upon consummation of the Merger Acquiror Series
B Preferred Shares having a liquidation preference of at least $1,000,000 (the
"Guarantor") shall have executed and delivered a guaranty agreement with
Acquiror, dated as of the Closing Date (the "Guaranty Agreement"), as set forth
as Exhibit F hereto with the completion of any blanks therein. The Guaranty
Agreement shall continue in full force and effect with respect to any claims
made prior to the date which is the earlier of (i) the date which is twenty (20)
days after the delivery to Acquiror by the Acquiror's independent public
accountant's of an audit opinion with respect to the Company's 1997 calendar
year financial statements and (ii) the date which is fifteen (15) months after
the Closing Date. The maximum obligation of the Guarantor under the Guaranty
Agreement shall be limited to an aggregate of $1,000,000 payable, at the
guarantor's option, by cash or by delivery of Acquiror Series B Preferred Shares
(based on a value of $25 per Acquiror Series B Preferred Share).
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SECTION 6.15 Registration Rights Agreement. The Affiliates of Target
listed in the Target Disclosure Letter shall have executed and delivered a
registration rights agreement with Acquiror, dated as of the Closing Date (the
"Registration Rights Agreement"), substantially in the form attached as Exhibit
G hereto, which shall set forth certain terms, conditions and limitations with
respect to the registration under the 1933 Act of the Acquiror Series B
Preferred Shares and the shares of the Acquiror Common Shares into which the
Acquiror Series B Preferred Shares are convertible. The Registration Rights
Agreement, when executed, shall be the legal, valid and binding obligation of
the signatories thereto, shall be enforceable in accordance with its terms
(except as may be limited by bankruptcy and other laws affecting the
enforceability of creditors' rights generally or laws governing the availability
of specific performance or other equitable remedies, or restrictions of the
enforcement of securities indemnification and contribution provisions imposed by
public policy), and shall not conflict with any other agreement to which any of
the signatories thereto is a party.
SECTION 6.16 Termination of Target Affiliate Contracts. All Target
Affiliate Contracts shall have been terminated and Target shall have paid in
full or otherwise satisfied and discharged all obligations under all Target
Affiliate Contracts.
SECTION 6.17 Redemption of Target Preferred Stock. Target shall have
redeemed such amount of Target Preferred Stock so that the applicable rate of
interest used to determine dividends payable pursuant to the terms of the Target
Preferred Stock shall be 8% from the date hereof through and including the
Closing Date.
SECTION 6.18 Estoppel Certificates. Target shall have furnished
Estoppel Certificates, substantially in the form required by Section 5.22, from
(a) each tenant listed on Schedule 6.18, (b) additional tenants under Target
Leases (the "Additional Tenants") leasing at least (75%) of the gross leasable
area of the Target Properties that is not leased by the tenants listed in
Schedule 6.18 (the "Non-Anchor GLA"), (c) each party to a Target REA Agreement,
provided that in the event Target is unable to obtain an Estoppel Certificate
from a party to a Target REA Agreement who is not required to provide same under
such agreement after exercising reasonable efforts to obtain same, the failure
to obtain such Estoppel Certificate shall not be a condition to Closing
hereunder and (d) each mortgagee with respect to each mortgage encumbering any
of the Target Properties. In the event that Additional Tenants leasing less than
75% of the Non-Anchor GLA shall have furnished Estoppel Certificates, provided
that Additional Tenants leasing at least 50% of the Non-Anchor GLA furnished
Estoppel Certificates, Concord Assets Group, Inc. and Castle Plaza, Inc. shall
have the right to satisfy the condition set forth in clause (b) above by
furnishing to Acquiror their own Estoppel Certificates with respect to a
sufficient number of Target Leases so that Estoppel Certificates covering at
least 75% of the Non-Anchor GLA shall have been furnished to Acquiror.
SECTION 6.19 Statement of Accounts Receivable. Target shall have
delivered to Acquiror (i) the Target Financial Statements and the Target Interim
Financial Statements, (ii)
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an unaudited balance sheet and related statements of revenues and cash flows at
and for the nine month period ended September 30, 1996, and, until the earlier
of the Effective Time or the termination of this Agreement, succeeding unaudited
quarterly and unaudited annual balance sheet and related statements of revenue
in the event the Closing shall occur on or after February 15, 1997 and (iii) a
statement of all accounts receivable as of the Effective Date, as determined in
accordance with GAAP applied on a consistent basis, and (iv) the Closing
Adjustment Statement.
SECTION 6.20 Title Insurance Policies. Acquiror shall have received
from the Title Company a title insurance policy for such of the Target
Properties as Acquiror may elect, dated the Effective Date, in the form
initialled by each of the parties hereto and without further exception or
qualification other than those which, individually or in the aggregate with all
other breaches of representations, warranties and covenants of Target, could not
reasonably be expected to have a Target Material Adverse Effect.
ARTICLE VII
CONDITIONS TO TARGET'S OBLIGATIONS
All obligations of Target under this Agreement are subject to the
fulfillment, at the Closing Date, of each of the following conditions, any or
all of which may be waived in whole or in part, at or prior to the Closing Date,
by Target in its sole discretion:
SECTION 7.01 Representations and Warranties. (i) All representations
and warranties of Acquiror and Newco contained in this Agreement, the Ancillary
Documents, or in the certificates and other documents delivered pursuant hereto
or thereto (other than representations or warranties qualified by reference to
materiality or an Acquiror Material Adverse Effect), shall be true and correct
in all material respects, and (ii) all representations and warranties of
Acquiror and Newco contained in this Agreement, the Ancillary Documents, or in
the certificates and other documents delivered pursuant hereto or thereto and
qualified by reference to materiality or an Acquiror Material Adverse Effect
shall be true and correct, in the case of each of clause (i) and (ii), at and as
of the Closing Date as though such representations and warranties were made at
and as of such time, except for those representations and warranties that are
expressly made as of a specified earlier date. For the purposes of Section
7.01(i), the representations and warranties of Acquiror and Newco shall be
deemed true and correct in all material respects unless the breach of such
representations or warranties could reasonably be expected to have an Acquiror
Material Adverse Effect.
SECTION 7.02 Covenants. Acquiror and Newco shall each have performed
and complied in all material respects with all agreements and conditions on
their respective parts required by this Agreement to be performed or complied
with prior to or on the Closing Date.
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SECTION 7.03 Officer's Certificate. Target shall have received a
certificate of an executive officer of each of Acquiror and Newco, dated the
Closing Date, certifying to the fulfillment of the conditions specified in
Section 7.01 and Section 7.02.
SECTION 7.04 Opinion of Counsel. Acquiror shall have received an
opinion of counsel of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP, counsel
for Acquiror, dated the Closing Date, in form and substance reasonably
satisfactory to Target, that, among other things, shall be to the effect that
the Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a)(1)(A) of the Code, and that Target and
Acquiror will each be a party to that reorganization within the meaning of
Section 368(b) of the Code.
SECTION 7.05 Absence of Changes. From the date of this Agreement
through the Effective Time, there shall not have occurred any change or changes
in the financial condition, business or operations of Acquiror that could
reasonably be expected to have a Acquiror Material Adverse Effect.
SECTION 7.06 Approvals and Consents. Target shall have received (in
form and substance reasonably satisfactory to Target) all Target Consents
designated as "required consents" in the Target Disclosure Letter.
SECTION 7.07 Injunctions. No court, agency or other authority shall
have issued any order, decree or judgment to set aside, restrain, enjoin or
prevent, and no statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any United States
court or Governmental Entity of competent jurisdiction which prohibits
restrains, enjoins, sets aside or prevents, the consummation of the Merger or
the transactions hereby contemplated.
SECTION 7.08 HSR Act. If applicable, Acquiror shall have made all
pre-merger notification filings required to be made by it under the HSR Act, all
applicable waiting periods thereunder shall have expired or been terminated
without any request from any appropriate governmental agency for additional
information or, if additional information has been requested, all applicable
extended waiting periods shall have expired.
SECTION 7.09 Effectiveness of Registration Statement. The Acquiror
Registration Statement shall have been declared effective under the 1933 Act,
all necessary state securities or "blue sky" permits or approvals required to
consummate the Merger and the other transactions contemplated by this Agreement
and the Ancillary Documents shall have been obtained, and no stop order or
proceedings seeking a stop order with respect to any of the foregoing shall be
in effect.
SECTION 7.10 Stockholder Approval. This Agreement and the Merger and
the other transactions contemplated by this Agreement and the Ancillary
Documents shall have been approved in the manner required by applicable law, and
by applicable regulations of any
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stock exchange or other regulatory body, by the holders of the issued and
outstanding shares of capital stock or beneficial interest of Target entitled to
vote thereon.
SECTION 7.11 Merger. The Delaware Merger Certificate shall have been
executed and delivered by Newco to Target.
SECTION 7.12 Accountants' Letters. Target shall have received "cold
comfort" letters from Xxxxxx Xxxxxxxx XXX, Xxxxxxxx'x independent public
accountants, dated no later than the date of the effectiveness of the Acquiror
Registration Statement (and the Target Proxy Statement included therein) and any
supplements and post-effective amendments thereto, with respect to the
operations of Acquiror in the form and substance of such letters delivered by
independent public accountants in connection with the Acquiror Registration
Statement and reasonably satisfactory to Target and its counsel.
SECTION 7.13 Financial Statements. Acquiror shall have delivered to
Target an unaudited balance sheet and related statements of revenues and cash
flows at and for the nine month period ended September 30, 1996, and succeeding
unaudited quarterly and unaudited annual balance sheet and related statements of
revenue in the event the Closing shall occur on or after February 15, 1997 in
conformity with GAAP applied on a consistent basis, except as otherwise noted
therein and for normal audit and accrual adjustments.
SECTION 7.14 Registration Rights Agreement. The Acquiror shall have
executed and delivered the Registration Rights Agreement. The Registration
Rights Agreement, when executed, shall be the legal, valid and binding
obligation of the signatories thereto, shall be enforceable in accordance with
its terms (except as may be limited by bankruptcy and other laws affecting the
enforceability of creditors' rights generally or laws governing the availability
of specific performance or other equitable remedies, or restrictions of the
enforcement of securities indemnification and contribution provisions imposed by
public policy), and shall not conflict with any other agreement to which any of
the signatories thereto is a party.
SECTION 7.15 Shareholders Agreement. The Acquiror shall have executed
and delivered the Shareholders Agreement. The Shareholders Agreement, when
executed, shall be the legal, valid and binding obligation of the signatories
thereto, shall be enforceable in accordance with its terms (except as may be
limited by bankruptcy and other laws affecting the enforceability of creditors'
rights generally or laws governing the availability of specific performance or
other equitable remedies, or restrictions of the enforcement of securities
indemnification and contribution provisions imposed by public policy) and shall
not conflict with any other agreement to which any of the signatories thereto is
a party.
SECTION 7.16 Fairness as to Target Preferred Stock. On or prior to the
Closing Date either (i) Target shall have caused Milestone to execute and
deliver to Acquiror and Target a consent to the exchange of the Series C
Preferred Shares for the Target Preferred Stock in the Merger and a waiver of
any claims with respect to the fairness of such exchange
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or (ii) Target shall have received the opinion of Societe Generale or another
investment banking firm to the effect that the consideration to be paid to the
holders of the Target Preferred Stock pursuant to the Merger is fair to the
holders of Target Preferred Stock from a financial point of view.
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.01 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the Target Stockholders Meeting:
(a) by mutual consent of Target and Acquiror;
(b) by either Target or Acquiror, if the Merger shall not have been
consummated by March 31, 1997, unless the failure to consummate the Merger on or
before such date shall have proximately resulted from (i) a material breach or
material breaches by the terminating party of any of its representations or
warranties contained in this Agreement (other than a representation or warranty
qualified by reference to materiality or an Acquiror Material Adverse Effect or
a Target Material Adverse Effect, as the case may be), (ii) a breach or breaches
by the terminating party of any of its representations or warranties contained
in this Agreement qualified by reference to materiality or an Acquiror Material
Adverse Effect or a Target Material Adverse Effect, as the case may be or (iii)
a material breach or material breaches of any agreement or covenant by the
terminating party contained in this Agreement;
(c) by either Target or Acquiror, if any permanent injunction or other
order, decree or ruling of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable; provided,
that the party seeking to terminate this Agreement pursuant to this Section
8.01(c) shall have used all reasonable efforts to remove such permanent
injunction or other order, decree or ruling;
(d) by action of the Board of Directors of Target, if (i) in the
exercise of its good faith judgment as to its fiduciary duties to its
stockholders imposed by law, after consultation with Rosenman & Colin LLP or
another nationally recognized law firm, the Board of Directors of Target
determines that such termination is required by reason of a proposal relating to
a Target Acquisition Transaction being made, or (ii) there has been a breach or
breaches of a representation or warranty of Acquiror or Newco contained in this
Agreement and such breach or breaches could reasonably be expected to have an
Acquiror Material Adverse Effect or (iii) there has been a material breach or
material breaches by Acquiror of any of the covenants or agreements of Acquiror
or Newco set forth in this Agreement on the part of Acquiror or Newco, which
breach or breaches are not curable or, if curable, are not cured within 30 days
after written notice of such breach or breaches is given by Target to Acquiror;
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(e) by action of the Board of Trustees of Acquiror, if (i) (A) the
Board of Directors of Target fails to make, or withdraws, materially modifies or
changes in a manner adverse to Acquiror its recommendation to the Target
Stockholders of this Agreement or the Merger, or resolves to do any of the
foregoing (other than as a result of the occurrence of an event that, in the
good faith judgment of the Board of Directors of Target, has or could reasonably
be expected to have a Acquiror Material Adverse Effect) and the holders of a
majority of the Target Common Stock outstanding do not promptly thereafter
execute and deliver, or shall not have previously executed and delivered, an
agreement, in form and substance reasonably satisfactory to Acquiror, pursuant
to which such holders agree to vote to approve this Agreement and the Merger at
the Target Stockholders Meeting and any adjournment thereof (provided, however,
if the Target Stockholders Meeting is held prior to the termination of this
Agreement by the Acquiror and the holders of a majority of the Target Common
Stock outstanding vote to approve this Agreement and the Merger at such Target
Stockholders Meeting, then Acquiror shall no longer have the right to terminate
this Agreement pursuant to this clause (e)(i)(A)), or (B) the Board of Directors
of Target shall have recommended that the Target Stockholders accept or approve
a Target Acquisition with a person other than Acquiror, or resolves to do the
foregoing, or (ii) the Target Stockholders Meeting has been duly convened and
held and the approval of the Target Stockholders required by Section 6.11 shall
not have been obtained at such meeting or any adjournment thereof, (iii) there
has been a breach or breaches of a representation or warranty of Target
contained in this Agreement and such breach or breaches could reasonably be
expected to have a Target Material Adverse Effect, or (iv) there has been a
material breach or material breaches by Target of any of the covenants or
agreements of Target set forth in this Agreement, which breach or breaches are
not curable or, if curable, are not cured within 30 days after written notice of
such breach or breaches is given by Acquiror to Target;
(f) by Target, if (i) Acquiror amends, alters or repeals, whether by
merger, consolidation or otherwise, any of the provisions of its Declaration of
Trust so as to adversely affect, in the reasonable opinion of Target, the
preferences, right to convert, conversion price adjustments, notice rights,
special conversion rights, distribution and liquidation rights, preferences,
restrictions or limitations, redemption rights and privileges or voting powers
or rights of the Acquiror Series B Preferred Shares or (ii) if Acquiror reduces
the dividend on Acquiror Common Shares below $0.48 per share of Acquiror Common
Shares for any calendar quarter ending during the period from the date hereof
through the Closing Date.
SECTION 8.02 Effect of Termination.
(a) If (i) Acquiror elects to terminate this Agreement pursuant to
Section 8.01(e)(i), (iii), or (iv), provided in the case of Section 8.01(e)(iv)
that such breach or breaches of covenants either (A) are within the reasonable
control of Target or (B) could reasonably be expected to have a Target Material
Adverse Effect, (ii) Acquiror elects to terminate this Agreement pursuant to
Section 8.01(e)(ii), unless Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Concord
Milestone Partners, L.P., Concord Associates, Concord Income Realty VI, L.P.,
Castle Plaza, Inc., Mill Neck Associates, and Mountain View Mall, Inc. used
their best efforts
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to approve, and were enjoined from approving, this Agreement and the Merger and
the other transactions contemplated by this Agreement and the Ancillary
Documents, or (iii) Target elects to terminate this Agreement pursuant to
Section 8.01(d)(i), then Target (or the successor thereto) shall, as liquidated
damages and not as a penalty or forfeiture, pay to Acquiror, from the Acquiror
Liquidated Damage Amount (as defined below) deposited into escrow in accordance
with the next sentence, an amount equal to the lesser of (m) the Acquiror
Liquidated Damage Amount and (n) the sum of (1) the maximum amount that can be
paid to Acquiror without causing Acquiror to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as if the payment of such
amount did not constitute income described in Sections 856(c)(2)(A)-(H) and
856(c)(3)(A)-(I) of the Code ("Qualifying Income"), as determined by Acquiror's
certified public accountants, and (2) in the event Acquiror receives a letter
from Acquiror's counsel indicating that Acquiror has received a ruling from the
IRS described in Section 8.02(b)(ii) or (iii) or in the event Acquiror receives
an opinion of counsel described in Section 8.02(b)(iv), an amount equal to the
Acquiror Liquidated Damage Amount less the amount payable under clause (1)
above. To secure Target's obligation to pay any amounts due and owing upon
termination of this Agreement pursuant to this Section 8.02(a), Target shall
deposit into escrow upon such termination an amount in cash equal to $930,000,
plus all documented out-of-pocket costs and expenses, up to a maximum of
$570,000, in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement incurred by Acquiror (collectively,
the "Acquiror Liquidated Damage Amount"), with an escrow agent selected by
Acquiror and on such terms (subject to Section 8.02(b)) as shall be agreed upon
by Acquiror and the escrow agent (as amended, supplemented or otherwise modified
from time to time, the "Escrow Agreement"). Notwithstanding anything contained
in this Agreement to the contrary, in the event of a dispute between Acquiror
and Target as to the payment by Target of the Acquiror Liquidated Damage Amount,
Acquiror shall not enjoin or seek to enjoin any merger, business combination,
sale of any Target Properties, sale of any other assets, sale of shares of
capital stock or similar transaction by Target, provided that Target has entered
into arrangements reasonably satisfactory to Acquiror to secure the payment of
the Acquiror Liquidated Damage Amount in the event such an amount is determined
to be due and owing. Except as otherwise provided in Section 8.01(d), the
payment or deposit into escrow of the Acquiror Liquidated Damage Amount pursuant
to this Section 8.02(a) shall be by wire transfer or bank check within three
days of the termination.
(b) The Escrow Agreement shall provide that the amount in escrow or any
portion thereof shall not be released to Acquiror unless the escrow agent
receives any one or combination of the following: (i) a letter from Acquiror's
certified public accountants indicating the maximum amount that can be paid by
the escrow agent to Acquiror without causing Acquiror to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code determined as if the
payment of such amount did not constitute Qualifying Income or a subsequent such
letter revising that amount, in which case the escrow agent shall release such
amount to Acquiror, or (ii) a letter from Acquiror's counsel indicating that
Acquiror received a ruling from the IRS holding that the receipt by Acquiror of
the Acquiror Liquidated Damage Amount would either constitute Qualifying Income
or would be excluded from gross income within the meaning of Sections 856(c)(2)
and (3) of the Code, in which case the escrow agent shall release the remainder
of the Acquiror Liquidated Damage Amount to Acquiror, or (iii) a letter from
Acquiror's counsel indicating that Acquiror received a ruling from the IRS
holding that the receipt by Acquiror of the remaining balance of the Acquiror
Liquidated Damage Amount following the receipt of and pursuant to such ruling
would not be deemed constructively received prior thereto, or (iv) an opinion of
Acquiror's counsel to the effect that the receipt by Acquiror of the Acquiror
Liquidated Damage Amount would either constitute Qualifying Income or would be
excluded from gross
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income within the meaning of Sections 856(c)(2) and 856(c)(3) of the Code, in
which case the escrow agent shall release the remainder of the Acquiror
Liquidated Damage Amount to Acquiror. Target agrees to amend this Section 8.02
at the request of Acquiror in order to (x) maximize the portion of the Acquiror
Liquidated Damage Amount that may be distributed to Acquiror hereunder without
causing Acquiror to fail to meet the requirements of Sections 856 (c)(2) and (3)
of the Code or (y) improve Acquiror's chances of securing a favorable ruling
described in this Section 8.02(b), provided that no such amendment may result in
any additional cost or expense to Target. The Escrow Agreement shall also
provide that any portion of the Acquiror Liquidated Damage Amount held in escrow
for five years shall be released by the escrow agent to Target. Target shall not
be a party to such Escrow Agreement and shall not bear any cost of or have
liability resulting from the Escrow Agreement.
(c) If (i) Target elects to terminate this Agreement pursuant to
Section 8.01(d)(ii) or (iii), provided in the case of Section 8.01(d)(iii) that
such breach or breaches of covenants either (A) are within the reasonable
control of Acquiror or (B) could reasonably be expected to have an Acquiror
Material Adverse Effect, Acquiror shall upon such termination, as liquidated
damages and not as a penalty or forfeiture, pay to Target an amount equal to
$930,000, plus all documented out-of-pocket costs and expenses, up to a maximum
of $570,000, in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement incurred by Acquiror (collectively,
the "Target Liquidated Damage Amount"). Except as otherwise provided in Section
8.01(d), the payment of the Target Liquidated Damage Amount pursuant to this
Section 8.02(c) shall be by wire transfer or bank check within three days of the
termination. Notwithstanding anything contained in this Agreement to the
contrary, in the event of a dispute between Acquiror and Target as to the
payment by Acquiror of the Target Liquidated Damage Amount, Target shall not
enjoin or seek to enjoin any merger, business combination, sale of any Acquiror
Properties, sale of any other assets, sale of shares of capital stock or similar
transaction by Acquiror, provided that Acquiror has entered into arrangements
reasonably satisfactory to Target to secure the payment of the Target Liquidated
Damage Amount in the event such an amount is determined to be due and owing.
(d) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article VIII, all obligations of the parties
hereto shall terminate, except the obligations of the parties pursuant to this
Section 8.02, Section 9.08, Section 9.10 and the confidentiality agreements,
dated April 16, 1996 and August __, 1996 (together, the "Confidentiality
Agreements"), between Target and Acquiror. Notwithstanding the foregoing,
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in the event that either party is required to file suit to seek all or a portion
of any Acquiror Liquidated Damage Amount and it ultimately obtains a judgment in
its favor, it shall be entitled to all expenses, including, without limitation,
attorneys' fees and expenses, which it has incurred in enforcing its rights
hereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Survival of Agreements and Representations and Warranties.
None of the agreements, representations and warranties contained in this
Agreement shall survive the Closing; provided, however, that (i) the agreements
contained in Article II, Section 5.03, Section 5.12, 5.16, Section 5.19, Section
5.21, Section 5.23, Section 8.02, Section 9.08, Section 9.10 and the
Confidentiality Agreements shall survive the Closing, (ii) all of the
representations and warranties of Target contained in this Agreement shall be
deemed to survive the Closing only for the purposes, and during the term, of the
Guaranty Agreement and (iii) all of the representations and warranties of
Acquiror contained in this Agreement shall be deemed to survive the Closing
until the Guaranty Termination Date. This Agreement has been entered into after
full investigation and neither party has relied upon any statement or
representation not embodied in this Agreement or the Confidentiality Agreements,
made by or on behalf of the other. Each of the parties hereto acknowledges and
agrees that the maximum obligation of the Company for amounts incurred or
suffered by Target, or any of its affiliates, directors, officers, stockholders,
representatives, employees or agents, by reason of, with respect to, or arising
from, any breach or breaches of any of its representations or warranties
contained in this Agreement shall be limited to an aggregate of $1,000,000
payable, at Acquiror's option, by cash or by delivery of Acquiror Series B
Preferred Shares (based on a value of $25 per Acquiror Series B Preferred
Share).
SECTION 9.02 Incorporation of Exhibits. The Disclosure Letters and all
of the Exhibits attached hereto and referred to herein are hereby incorporated
herein and made a part hereof for all purposes as if fully set forth herein. Any
capitalized terms used in either Disclosure Letter or any Exhibit but not
otherwise defined therein shall have the meaning as defined in this Agreement.
When a reference is made in a Disclosure Letter or an Exhibit to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.
All references to Sections and Subsections refer to Sections and Subsections of
this Agreement.
SECTION 9.03 Notices. All notices and other communications hereunder
shall be in writing (and shall be deemed given upon receipt) if delivered
personally, sent by facsimile transmission (receipt of which is confirmed) or by
registered or certified mail, return receipt requested, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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if to Target, to:
Union Property Investors, Inc.
0000 Xxxx Xxxxxx Xxxxxx
0xx xxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
with a copy to:
Rosenman & Colin LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
and
if to Acquiror or Newco, to:
Kranzco Realty Trust
000 Xxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxxxxxxx Xxxxxx
Aronsohn & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
SECTION 9.04 Descriptive Headings. The descriptive headings herein are
inserted for convenience only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
SECTION 9.05 Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder or under any
of the Ancillary Documents shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other parties. Subject to the preceding sentence, this
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Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Article II and Section 5.12, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement or any
of the Ancillary Documents.
SECTION 9.06 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
SECTION 9.07 Entire Agreement. This Agreement, the Disclosure Letters
and each of the Exhibits hereto constitute the entire agreement and supersede
all prior contracts and understandings, both written and oral, among the parties
with respect to the subject matter hereof other than the Confidentiality
Agreements, any provisions of which are inconsistent with the transactions
contemplated by this Agreement being waived hereby but the provisions of which
that are not inconsistent shall survive.
SECTION 9.08 Governing Law and Consent to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without regard to any applicable principles of conflicts of law. Each
of Target, Acquiror and Newco hereby consents to submit to the exclusive
jurisdiction of the courts of the state of New York and of the United States of
America located in the city and state of New York (the "New York Courts") for
any litigation arising out of or relating to this Agreement and the transactions
contemplated hereby and agrees not to commence any litigation relating thereto
except in such courts, waives any objection to the laying of venue of any such
litigation in the New York Courts and agrees not to plead or claim that such
litigation brought in any New York Court has been brought in an inconvenient
forum.
SECTION 9.09 Fees and Expenses. Except as otherwise set forth herein,
each of the parties hereto shall bear its own expenses associated with the
negotiation and execution of the Agreement and the consummation of the Merger
and the other transactions hereby by this Agreement and the Ancillary Documents
including, without limitation, investment banking, legal and accounting fees and
expenses.
SECTION 9.10 Non-Recourse.
(a) This Agreement and all documents, agreements, understandings and
arrangements relating hereto have been entered into or executed on behalf of
Acquiror by the undersigned in his capacity as a trustee or officer of Acquiror,
which has been formed as a Maryland real estate investment trust pursuant to an
Amended and Restated Declaration of Trust of
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Acquiror, as amended and restated, and not individually. Neither the trustees,
officers nor shareholders of Acquiror shall be personally bound or have any
personal liability hereunder. Target shall look solely to the assets of Acquiror
for satisfaction of any liability of Acquiror with respect to this Agreement and
the Ancillary Agreements to which it is a party. Target will not seek recourse
or commence any action against any of the trustees, officers or shareholders of
Acquiror or any of their personal assets for the performance or payment of any
obligation of Acquiror hereunder or thereunder.
(b) This Agreement, and all documents, agreements, understandings and
arrangements relating hereto, have been entered into or executed on behalf of
Target by the undersigned in his or her capacity as an officer of Target, a
Delaware corporation, and not individually. Neither the officers nor
stockholders of Target shall be personally bound or have any personal liability
hereunder. Acquiror shall look solely to the assets of Target for satisfaction
of any liability of Target with respect to this Agreement and the Ancillary
Documents to which it is a party. Acquiror will not seek recourse or commence
any action against any of the stockholders, directors or officers of Target or
any of their personal assets for the performance or payment of any obligation of
Target hereunder or thereunder. Nothing contained in this paragraph shall affect
the rights or obligations of any person or entity under the Stockholders
Agreement, the Guaranty Agreement, the Registration Rights Agreement or the
Affiliate Letters.
SECTION 9.11 Enforcement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any New York Court, this being
in addition to any other remedy to which they are entitled at law or in equity.
Except as otherwise set forth herein, the prevailing party in any proceeding
brought to enforce any provision of the Agreement shall be entitled to recover
the reasonable fees and costs of its counsel, plus all other costs of such
proceeding.
SECTION 9.12 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
SECTION 9.13 Amendment. This Agreement may be amended by the parties
hereto at any time before or after approval by the Target Stockholders of the
matters presented in connection with the Merger, but, after any such stockholder
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further
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approval. This Agreement may not be amended except by a written instrument
signed on behalf of each of the parties hereto.
SECTION 9.14 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained in this Agreement, the Ancillary Documents, or in the certificates and
other documents delivered pursuant hereto or thereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
SECTION 9.15 Knowledge. With respect to "knowledge", as such term is
used in this Agreement, Acquiror or Newco will be deemed to have "knowledge" or
received notice of a particular fact or other matter if any individual who is
serving as an director or officer of Acquiror or Newco, respectively, is
actually aware of such fact or other matter. With respect to "knowledge", as
such term is used in this Agreement, Target will be deemed to have "knowledge"
or received notice of a particular fact or other matter if any individual who is
serving as an director or officer of Target, Milestone Property Management, Inc.
or Milestone Properties, Inc. is actually aware of such fact or other matter.
SECTION 9.16 Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
KRANZCO REALTY TRUST UNION PROPERTY INVESTORS, INC.
By: /s/ Xxxxxx Xxxxxxxxx By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx Xxxxxxxxx Name: Xxxxxx X. Xxxxxx
Title: President Title: President
KRT UNION CORP.
By: /s/ Xxxxxx Xxxxxxxxx
Name: Xxxxxx Xxxxxxxxx
Title: President
